BRITAIN'S banks have taken a tremendous battering from the British media in recent months, and most of it has been well deserved. Even after the spate of resignations among top bosses at those institutions bailed out by the taxpayer, there are in fact still rather too many senior figures in banking who appear reluctant to face up to the full measure of responsibility which their industry bears for the current recession.

BRITAIN'S banks have taken a tremendous battering from the British media in recent months, and most of it has been well deserved.

Even after the spate of resignations among top bosses at those institutions bailed out by the taxpayer, there are in fact still rather too many senior figures in banking who appear reluctant to face up to the full measure of responsibility which their industry bears for the current recession.

All the same, it would have taken a heart of stone not to feel a pang of sympathy for the banking sector for the treatment it received last week.

On Wednesday, when Chancellor Alistair Darling unveiled his White Paper on financial reform (such as it was - see below) the glowing embers of the irresponsible lending saga were raked over once more.

On Thursday, however, when the Bank of England's Monetary Policy Committee concluded its monthly two day meeting by leaving on hold both interest rates and, more surprisingly, its quantitative easing programme, there was negative comment on how the increased money supply was having only a limited impact on the economy because of the banks' caution over lending.

The phrase “damned if they do and damned if the don't” sprang to mind.

Of course there is a happy medium to be struck when it comes to lending and of course we have not reached that point yet, with confidence still so fragile.

And yet, in broad principle, are not the banks now doing very much what they ought to do all the time - namely, lending money only when there is a very good chance that the sum will be repaid?

Despite the need to rebuild their balance sheets, the banks are not simply sitting on piles of cash. They want to lend money because they need to lend money in order to make money - and so they are, where they believe it is prudent to do so.

After such a steep plunge into recession it is inevitable that confidence, and with it lending, will only improve very slowly - and perhaps not at all in the short term, with unemployment set to climb further in the coming months even if an end to recession is now in sight.

n Amid last autumn's near-meltdown in the financial sector, the Government talked grandly - if absurdly - about the bailed out banks returning to former levels of lending in order to assist economic recovery, ignoring completely the fact that it was the lending practices of the past which landed us in the current mess.

Since the Government has gone on a borrowing binge of its own we should probably not be surprised at this lack of realism, still less at its attempts to engineer - in appearance at least - a recovery ahead of the General Election at the likely cost of further downturn to follow.

But surely Alistair Darling should have done more in last week's White Paper on banking reform to strengthen the regulatory regime? True, there were a few extra powers for the Financial Services Authority (if it chooses to use them) but there was nothing for the Bank of England which has the responsibility for monitoring the bigger picture but lacks the powers to match.

Instead, we are to have a new Council for Financial Stability or, to put it another way, a committee - with the Chancellor in the chair. Why am I not reassured?