German banking head denies credit-tightening charges

7th July 2009, Comments 0 comments

Over the weekend, several German politicians criticised banks after companies reported that credit conditions had gotten tighter in the country.

Berlin -- The head of the German private banking federation BdB on Monday rejected charges that banks were holding back on lending needed to resolve the country's landmark recession.

"Credit operations are part of our business. We cannot be said to no longer want to do business," Manfred Weber told Deutschlandradio Kultur.

Over the weekend, several German politicians criticised banks after companies reported that credit conditions had gotten tighter in the country.

Finance Minister Peer Steinbrueck and Economy Minister Karl-Theodor zu Guttenberg said banks have borrowed large sums from the European Central Bank (ECB) at favourable rates without passing the credit on.

Steinbrueck told the Bild am Sonntag newspaper Sunday that if a credit crunch were to emerge later this year, the government and the German central bank would have "to look for solutions."

Germany is currently in the midst of its worst recession since World War II.

ECB president Jean-Claude Trichet also urged commercial banks last week to live "up to their responsibilities" and relay massive ECB loans to the broader economy.

German central bank governor Axel Weber has warned that the ECB might have to go around banks and lend directly to businesses if credit remained tight.

The ECB said last week that growth of lending to the private sector was at an all time low in June, partly because weak activity and rising unemployment have incited companies and households to seek fewer loans.

AFP/Expatica

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