Stuart Fraser, chairman (policy & resources committee), City of London, has cautioned that British banks like Lloyds, Barclays and Royal Bank of Scotland, which are facing severe economic downturn in the United Kingdom, may slow down or pull back their money from countries like India or China.
Speaking to FE, Fraser, who was in the city recently, said, “The British banks excluding HSBC and Standard Chartered Bank. Rest of the banking majors are now depending upon the government to manage their business in difficult times.”
Although UK government may not like it as such a move may affect its trade relationship with other countries, the situation may be compelling.
“However, the individual banks may have their own policies and I cannot speak on behalf of them. The new entrants from UK are most likely to exit foreign shores in a bid to strengthen their banking operations in the homeland. We have seen this happening in Japan in late 90s,” he explained.
The foreign banks are pulling money out of the country to their homelands due to various reasons. It amounts to over 30% of the total credit presently being supplied by these banks to the British banking sector. “It is further tightening the credit situation in the UK. It is expected to continue for some more time,” he said.
Also when it comes to the syndication of loans, foreign banks in the UK now expect a bigger share from the domestic banks in the syndicated pool. That’s where the contraction in lending is happening, Fraser adds.
On India as an investment destination Fraser said, “In the UK, fortunately a developing economy India is perceived to be a very attractive market, especially the infrastructure sector.”
However, he said, “We do not want huge companies in the UK, either Indian or British, to collapse as saving jobs is an upmost priority for the British government. We would certainly aid these companies by offering specialised bail-out packages to encash long term gains, if need arises in future.”
“My interaction with the policy makers in the UK makes me understand that ‘jobs only for British’ thought is not perceived as a good idea even in the current dull economic scenario in the country,” he observed.
UK intends to have better regulations under a global framework in the country once the economic situation improves.
Protecting the depositors’ money in the banks in the UK will be given upmost priority in future under a stringent regulatory framework. However, UK would also allow a certain class of people or institutions to take calculated risks and invest in certain businesses and financial instruments in future in the UK as growth was directly co-related to risks in the financial services sector, he said.