March, 30, 2010

The UK government has provided nearly £1 trillion of support to the banking sector since the onset of the financial crisis.That is more than half the entire annual economic output of the UK.And the reason? Banks, the government insists, provide access to money, without which individuals and businesses cannot spend and invest, and without which the UK economy cannot grow.

This same reason was given by the Bank of England as one of the key aims of pumping a further £200bn into the economy through its quantitative easing (QE) programme.Although the Bank has since played down the importance of stimulating lending, QE was designed specifically to increase bank lending, lower the cost of borrowing and boost asset prices when it was introduced in March last year.The message, then, was loud and clear - without bank lending increasing significantly, there was no hope for a full economic recovery.

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