Bank shares up after aid plan

Shares in UK banks have risen after the Bank of England and Treasury revealed plans for an emergency bank funding scheme to kick-start lending to households and businesses.

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FTSE 100 closes 11.8 points higher ahead of Greek elections

The FTSE 100 Index has closed 11.8 points higher at 5478.8 after reports that the US Federal Reserve, Bank of Japan and Bank of England were drawing up plans to cushion the blow of a Greek default.

The London market kept its head above water on hopes that central banks globally are ready to act if this weekend's election in Greece ultimately leads to the debt-laden country leaving the euro.

The pound was up against the euro at 1.23 as the single currency weakened ahead of Sunday's Greek poll, while sterling was also ahead against the US dollar at 1.56.

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'Hold the bunting until credit translates into lending'

Lending measures are "very welcome" - but it's not time for bunting Credit: Geoff Kirby/EMPICS Entertainment

Nigel Stockton, the Financial Services Director at Countrywide estate agency, has said that he "will only start putting the bunting back out" when he sees how the credit being offered to British banks is deployed.

He said: "The market needs specific mortgage lending targets and increased gross lending targets. Without these targets, there is a real danger that this money will again be used by the banks for balance sheet management and not to increase mortgage lending."

'Giving banks credit could trigger risky lending'

The City A.M. editor Alistair Heath has said that the measures to get banks lending may encourage them to take greater risks, of the type that led to the sub-prime mortgage crisis in the United States. He told the BBC's World At One:

There is a real risk that this would trigger more risky lending ... It is very important that the banks remain prudent. We all remember what happened with sub-prime lending.

Lending measures 'positive news' for home buyers

Paul Smee, the head of the Council of Mortgage Lenders, has told ITV News that the Government's new lending measures for banks are "broadly to be welcomed". He said:

It is very difficult for me at this juncture to comment on what the effect will be on pricing. A lot of factors go into a decision on how to price a mortgage loan, however I can see this will be a positive factor.

– Paul Smee, Director General, Council of Mortgage lenders

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'Banks must pass on money to businesses'

The head of the Federation for Small Businesses has released this statement is response to the Government's announcement of new lending measures for banks:

The banks have long said that it is a lack of demand that has reduced lending, but the FSB’s own research shows of those firms applying for credit around 40% are rejected ... We are pleased thatthe funding will be available in the coming weeks. However there must bea clear reporting process to provide tangible evidence the money is beingpassed on to small firms and not just shoring up the banks.

– John Walker, National Chairman, Federation of Small Businesses
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