Banks Encouraged Not To Repay Loans Early
Over the course of the past couple of years or so, a number of major high street banks have effectively been partly, or fully, nationalised by receiving a financial bail out in the form of a loan from the Government.
Northern Rock was the first bank to receive a loan, followed by the Royal Bank of Scotland and the Lloyds Banking Group, all of whom have received billions of pounds worth of tax payers money. Northern Rock has already repaid a substantial amount of its loan back to the Government and is on track to meet its repayment targets and the Lloyds Group announced earlier this week that it intends to repay part of its loan also.
But now, the Liberal Democrats are warning that it could be a bad move for banks to repay their government loans too early. Danny Alexander, chief of staff of the Lib Dems, has commented that although there are many positive signs that the UK economy is slowly starting to recover, particularly in the housing and homeowner loan markets, we are by no means out of the woods yet and the economy is still in an extremely fragile state, as yet facing an uncertain future and banks who are in receipt of Government loans should hang on to the money a bit longer, until there are more positive signs of a full recovery in the economy.
Mr Alexander said “Paying off the government is a good idea as having nationalised banks is a grim necessity. But if this is a false dawn going on at the moment, things could get worse later and we don’t want to get into the situation where banks come cap in hand for more money.”
