UK banks have a whopping £300 billion more in savings that they do outstanding loans which has created a vast imbalance in the system and created the polar opposite to market conditions seen before the global financial crisis.

That was the message from Darren Winder, head of Lazarus Economics and Strategy speaking to delegates at yesterday’s Brightstar Specialist Lending Expo.

IMBALANCE

And according to Winder, the simplest way to grow the UK economy would be to deter saving and encourage borrowing.

He told delegates: “There’s an imbalance between saving and lending and I would say [that] this isn’t working as borrowers can’t benefit as there’s so much regulation.

“We’ve got to try and find an interest rate that brings the levels of savings and borrowing together.

“Savers have gone from getting sort of nothing for 10 years to now getting quite a lot and the borrowers are clearly getting rates that doesn’t allow them [lenders] to grow the loan book at the rate it should be doing.”

EXACT OPPOSITE TO PRE-CRUNCH

And he added: “What happens then is that across the banking system all the banks put together now have £2 trillion pounds worth of deposits just from households which is £300 billion more than they have got on loans.

“So this is like the exact opposite of what we had before the financial crisis when the banks together had far more loans than they had deposits and that became a problem.

“what is it going to take to discourage people from having all this money in bank accounts?”

“This is a similar problem but exactly the other way around now. Because a lot of these savings aren’t at fixed rates what you are seeing in the accrued interest is twice as big as the loans.

“The flip side is that the economy has a huge amount of savings. What we need to find and ask ourselves is what is it going to take to discourage people from having all this money in bank accounts and getting some of it into the economy – that’s the simplest path to growth is to deter saving and encourage borrowing.”