Nov. 3 (Bloomberg) -- HSBC Holdings Plc defied a call from U.K. Prime Minister Gordon Brown to revive lending, signaling it probably won't pass on to consumers and businesses the full impact of rate reductions from the Bank of England.

David Hodgkinson, who is chief operating officer of Europe's largest bank, said banks around the globe are re- evaluating the price they put on risk, raising the price of loans when compared with levels in previous years.

``Credit has to be priced appropriately to reflect the risk,'' Hodgkinson said in an interview in Abu Dhabi today, where he was part of Brown's delegation on a Middle East visit. ``If interest rates are brought down significantly, then rates for borrowers will come down. But I'm not going to say it's absolutely linear because it depends on the particular transaction and the risk.''

Brown has called on banks to return lending to 2007 levels after a worldwide squeeze on credit dried up the appetite for risk at banks. In Britain, banks approved 33,000 mortgages last month, a third of the 104,000 a month average last year.

``Having helped to strengthen the global banking system through recapitalization, governments must ensure that the money is used to enable the resumption of lending to families and businesses,'' Brown said in a speech in Abu Dhabi today.

Rate Cuts

Bank of England policy makers cut their benchmark rate a half point last month and probably will lower it again by the same amount to 4 percent on Nov. 6, according to a survey of economists by Bloomberg News. Governor Mervyn King has said he doesn't expect the full extent of the bank's rate reductions to be felt directly by consumers.

``The age of innocence -- when banks lent to each other unsecured for three months or longer at only a small premium to expected policy rates -- will not quickly, if ever, return,'' King said on Oct. 21.

Britain's Conservative opposition said Brown was failing to ensure that taxpayers and businesses benefit from the government's bank rescue program.

``The government's recapitalization package may have rescued the banks, but there's not enough evidence that it's helping to get credit to responsible homeowners and small businesses who need it,'' George Osborne, a Conservative lawmaker who speaks on Treasury policy, said in London.

Rescue Plan

Brown and Chancellor of the Exchequer Alistair Darling have made increased lending a condition of the government's 50 billion-pound ($81 billion) bank rescue plan. They lined up funding from the central bank and the European Investment Bank to stimulate lending by U.K. institutions.

``What we are trying to do here is to improve the workings of the money market so that we can get more liquidity into the market and get the wholesale money market working better, and that, ultimately, should benefit consumers,'' Michael Ellam, a spokesman for Brown, told journalists today.

HSBC isn't among the banks tapping government funds to increase its capital, and Hodgkinson said he wasn't seeking cash from funds in the Middle East this week. He spoke while traveling with Brown from Doha, Qatar, to Abu Dhabi in the United Arab Emirates.

Hodgkinson said credit markets are beginning to loosen, although ``it is going to take a while'' before credit conditions return to more normal levels.

``The three- to six-month time period is still not very liquid,'' he said. ``The issue is where banks had very leveraged balance sheets they had to shrink those to improve their overall position. We will get through this. It's a period of adjustment, temporary not permanent.''

Hodgkinson said he came to the region with Brown as part of an effort to improve ties with banks in the Persian Gulf, which are actively financing infrastructure projects in the region.

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To contact the reporters on this story: Gonzalo Vina in Doha at gvina@bloomberg.net

Last Updated: November 3, 2008 11:56 EST