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Banks `may have to be forced to lend`

15/01/2009

The government may have to step in and force banks to lend more money to consumers and businesses, it has been suggested.

According to Jonathan Loynes, chief European economist at Capital Economics, the continued lack of credit in the economy could turn the current financial problems into something much more serious.

He said: "[The government has] got to ... encourage [banks] or perhaps even force them to actually lend ... money into the wider economy so that households and companies can operate in a normal way."

Mr Loynes added that reducing interest rates and increasing the amount of money financial service providers have at their disposal are "all very well", but promoting lending has to be a "top priority".

His view may be supported by consumers who have struggled to get loans since the onset of the economic crisis.

Founded in 1999, Capital Economics is an economic research consultancy with operations around the world.

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