Difficult to see justification for HSBC not passing on interest rate cut
Commenting on the Chief Operating Officer of HSBC, David Hodgkinson's warning that the bank may not pass on an expected interest rate cut to its customers, Liberal Democrat Shadow Chancellor, Vince Cable said: "It is difficult to see the justification for Mr Hodgkinson's comments that a cut in the Bank of England's interest rates may not be fully passed on to customers."
Vince Cable went on to say:
"Banks are only too happy to increase the cost of lending when interest rates go up. For customers to get a fair deal, this needs to be a two way street.
"When the whole banking industry owes so much to taxpayers for their very survival, any bank will find itself on very thin ice if it is found to be unfairly profiteering from its customers.
"As the credit crunch continues to keep millions of customers and small businesses in a stranglehold, borrowers need interest rate cuts now."
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The cash injection of the bailout is not money that they can just turn around and relend, it is to recapitalize the banks in the hope that they will start lending amongst each other - a precursor to them lending to the rest of us. If that rate, the LIBOR rate, does not fall as far as the base rate, which is highly likely given what LIBOR has been doing for over a year now, it is not difficult to see why HSBC will not feel comfortable passing on the whole of a base rate cut.
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