Prime Minister Gordon Brown called for a return to more prudent lending by British banks as they struggle to survive the financial crisis and rebuild their businesses with the help of taxpayers' money, Bloomberg reported.
"We do want to see the reinvention of the traditional savings and mortgage bank in Britain, for loans to be made on prudent and careful terms, not just to people with large deposits, but to first-time buyers and those on middle and modest incomes," Brown wrote in the Observer newspaper today.
Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc, both part-owned by the taxpayer, have asked the government to insure almost 500 billion pounds ($720 billion) of assets as part of the Treasury's plan to spur lending, the Sunday Telegraph said today. Bank of England Deputy Governor John Gieve said this week that Britain faces the threat of a decade-long depression.
"We need to ensure that the U.K. banking system that emerges over the coming months is refocused on providing strong competitive banking for domestically focused businesses, including start-ups and entrepreneurs, as well as mortgages for those who want to buy a home," Brown wrote. "In short, we need stronger business banks, mortgage banks and savings banks."
Brown said that the government has asked the Financial Services Authority to look at how to regulate the provision of mortgages that are worth more than the homes they are secured on. Northern Rock Plc, the first British bank to be nationalized as a result of the crisis, offered such loans before the seizure of wholesale funding markets undermined its business model.