Clearly, the hole left by the failure of global capital markets is unlikely to be filled anytime soon but we are being told the credit drought will start to ease in the next few months.
That said, there are still problems for the boards of banks, whose capital ratios are under scrutiny not only by the regulator but also by the national media.
Share prices go up and down seemingly daily, based partly on the perceived strength of these capital ratios and the underlying strength of banks’ balance sheets.
My point is that I am sceptical about the volume of additional lending banks are committing to and I’m also concerned about who this lending will go to.
Brown says £40bn of extra lending is being made available but if, as the market anticipates, the we are heading for net lending of -£25bn this year and assuming all £40bn materialises in 2009, net lending will be a mere £15bn.
And of course that £40bn has to be split between businesses and home owners so it seems 2009 will show negative net lending, no matter what.
The peak for net lending was £110bn in 2006 so the shortfall is daunting and it’s obvious that more must be done.
Exact is publishing a White Paper soon on options that would allow the government to bypass stricken banks and lend directly to home owners.