Banks would be expected to increase lending if the government agreed to reduce the fee on its existing funding guarantee programme, or if it introduced new schemes to prop up lenders, banking leaders were told on Thursday. The government’s £200bn credit guarantee scheme allows banks to raise unsecured funding backed by the government for a fee. The state is considering other schemes to help the banks, but lenders were told on Thursday that there would have to be a quid pro quo, such as increasing their lending. One option being considered is for the taxpayer to guarantee bonds issued by banks and supported by a wide range of collateral, including home loans and small business loans, as a way of trying to reopen wholesale funding markets.

This entry was posted by Stacy-Marie Ishmael on Friday, December 12th, 2008 at 5:31 and is filed under Capital markets. Edit this entry.