Bank of England determined to increase credit liquidity in the UK

Over the last few months we have seen a number of financial initiatives from the UK government and the Bank of England as the authorities attempt to increase liquidity in the UK marketplace. However, so far UK banks have been unwilling or unable to increase liquidity to a level which will allow the property market, the business market and the consumer market to improve. As a consequence we are likely to see a number of new initiatives and new pressures placed upon the financial sector to increase liquidity in the short term.

Credit is required to oil the wheels of the UK economy and without it the UK will literally grind to a halt and we could end up in a situation far worse than the one seen last year. It seems bizarre that we are at this stage of the economic cycle with very little liquidity available when the UK government forced the Royal Bank of Scotland and Lloyds Bank to sign up to legally binding agreements regarding increased liquidity levels.

These targets will be missed by a country mile although the UK government has a limited number of penalties which it can dish out to the banks without impacting on their competitiveness in the short term.