British government tells banks to kick-start lending

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Britain's banks must use their first-half profits to start lending to businesses again, Chancellor of the Exchequer George Osborne said in an interview published on Sunday.

With Britain's top banks preparing to reveal they bounced back in the black during the first six months of the year, they must get credit flowing, Osborne told The Sunday Telegraph newspaper.

"We have got to be pretty clear with the banks ... that we will not tolerate banks piling the pressure on small and medium-sized businesses," the finance secretary said.

"They have an economic obligation to assist that sector and give it all the assistance that they got."

HSBC kicks off the half-year earnings season for Britain's banks on Monday, followed by Lloyds Banking Group and Standard Chartered on Wednesday, Barclays on Thursday and Royal Bank of Scotland (RBS) on Friday.

"Every small and medium-sized company that I have visited in recent weeks has had some problem with their bank -- either they have found it difficult to renew their overdraft or they demanded additional collateral, often someone's house," Osborne added.

"The danger is that, particularly next year, when there is a huge amount of refinancing required, that the small and medium-sized businesses suffer from a lack of access to working capital."

Lloyds and RBS are now 41-percent and 83-percent state-owned, after both groups received big government bailouts at the height of the global financial crisis.

© 2010 AFP

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