Mandelson chides banks for being 'too conservative'

British Business Secretary Peter Mandelson has chided the banks for having adopted too conservative lending policies in the liquidity crisis, risking further damage to their balance sheets and profits by failing to provide cash to small business.

There was a 'disjunction' between what he was hearing from firms around the country and bankers in London, Reuters reports. 'The banks have experienced a sharp liquidity crisis,' he told the Guardian newspaper. 'They have lent too much at too cheap a price for too long. But they are now overreacting to that, in my opinion, in too conservative and restrictive a way.

'They are in danger of substituting one set of problems for another, and in the process doing themselves further damage by underlending and not strengthening their balance sheets and profits in the longer term. They are close to cutting off their noses to spite their faces.'

Mandelson put no-one's mind at ease, seeming to contradicting official government forecasts of last week that the economy would start to recover in the second half of 2009, by saying he did not know how long the recession would last.

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