Treasury hits back at WTO's bailout attack

THE government last night defended bank bailouts in retaliation to suggestions by the World Trade Organisation that Britain may have contravened trade laws in keeping Royal Bank of Scotland and Lloyds Banking Group afloat.<br /><br />The Treasury responded with surprise to comments from WTO director general Pascal Lamy that bank bailouts may amount to &ldquo;financial protectionism&rdquo;.<br /><br />Lamy was reported as saying that the WTO would consider investigating the agreements forced on the banks to ensure that they channelled more lending to UK customers in return for government assistance.<br /><br />Despite the liquidity crisis, the banks were made to lend to UK customers at 2007 levels , forcing them to pull out of some international businesses in favour of domestic markets.<br /><br />The Government&rsquo;s recent bank break-up has gone further by forcing RBS and Lloyds to sell offshore businesses and separate their local operations in an engineered bid to stimulate competition among lenders.<br /><br />A Treasury spokesman questioned why Britain was seemingly being singled out when the bank bailouts were a co-ordinated international move to prevent a complete collapse of the financial system.<br /><br />He said: &ldquo;The Government took action, like other countries around the world, to stabilise the banking system and protect financial stability. The result has been that no depositor has lost money and binding commitments have been put in place with the banks to lend to families and businesses at a time when they need support the most.&rdquo;