Brown said the government was determined to create conditions for banks to resume lending, but that giving more cash to financial institutions “is not the first thing on any agenda.”
The Bank of England said in its quarterly credit conditions survey on Friday that despite government action, the country’s banks planned to further cut back on lending to individuals and businesses over the next three months.
Reports suggest British Chairman of the Exchequer Alistair Darling is considering a package of new measures that may include gathering up banks’ bad loans into a new entity or exchanging them for government bonds.
Treasury officials have previously said they would monitor the effects of October’s US$64 billion bail-out of three British banks and take further action if necessary.
“Clearly we have banks that were willing to take large numbers of risks a year or two ago and people are now averse to risk, so we have got to create the conditions in which it’s possible for banks to resume lending,” Brown said.
Asked about any further recapitalization plans, he said: “The more important thing is getting the resumption of lending by other means.”
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