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Early Sale of RBS Stake Would Hit Loans to Companies, Clegg Says

Sept. 25 (Bloomberg) -- An early sale of the U.K. government’s stake in Royal Bank of Scotland Group Plc would put lending to companies and households at risk, Deputy Prime Minister Nick Clegg said.

“You need to put pressure on the banking system to ensure that they sort out their own balance sheet,” Clegg said in a Bloomberg Television interview yesterday in Brighton, on England’s South Coast, where his Liberal Democrat party is holding its annual conference. “However, if you put too much pressure on the banks to do it too quickly, in a rush, the effect is that banks hoard cash. If we put too much pressure on too quickly to withdraw our stakes, we will only exacerbate the problems of credit in the real economy.”

Britain’s largest state-owned lender has reduced assets by more than 800 billion pounds ($1.3 trillion), eliminated 36,000 jobs and scaled back securities and Irish units since it was rescued in 2008. The bank’s shares are still trading at less than half the level at which the government bought its 82 percent stake for about 45.5 billion pounds.

Liberal Democrat Business Secretary Vince Cable yesterday announced plans for a “business bank” aimed at spurring lending to companies and helping the economy grow. Cable said that reluctance by banks to lend was a key obstacle to recovery.

To contact the reporter on this story: Robert Hutton in Brighton, England at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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