German finance minister pressuring banks to provide more lending

July 13, 2009 by · Leave a Comment
Filed under: Global News 

It is not a good sign to see pressure being put on to banks to provide lending in a economic environment that does not support such an expansion of credit.  This is what will lead to more defaults if the income is not there to support the debt service on this additional lending activity.  Another issue you will have to deal with and the German population is familiar with…inflation. Steinbrueck mention that banks have a responsibility for the overall economy, I would hope that includes price stability and growth, not just growth.

News (Reuters):

Finance Minister Peer Steinbrueck has written to German bankers pressing them to supply the economy with ample liquidity, raising pressure on lenders to increase the flow of funds to businesses.

Steinbrueck is concerned that credit conditions could tighten later this year, throttling Europe’s largest economy just as it shows the first signs of emerging from its deepest recession since World War Two.

He has already floated the idea of the Bundesbank, Germany’s central bank, buying up corporate bonds to help ease a squeeze on credit markets and accused banks of not doing enough to pass on liquidity they have accessed from the European Central Bank.

“A sustained recovery of the real economy will only be possible when the credit sector is on a solid footing again,” Steinbrueck wrote in the letter to Germany’s banking associations, dated July 8, which was seen by Reuters on Monday.

“Credit institutions in Germany today face a particular responsibility for the overall economy,” he added.

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