Banks told to pass on rate cuts

Banks must pass on interest rate cuts from the Bank of England to their customers to play their part in preventing the UK falling into recession, chancellor Alistair Darling has warned.

The Bank of England's monetary policy committee has cut interest rates three times in five months but many banks have actually raised the rate at which they lend money to customers, effectively depriving the Bank of its ability to control the money supply.

Darling said the Bank of England had put £15bn into the financial system and expected financial institutions to play their part.

He also called on them to come clean about their potential bad debts in a bid to restore confidence in the banking system and encourage banks to lend money to each other once more.

"We are prepared to play our part," said Darling. "In turn, what we are saying to banks is you have got to help people as well.

"If you can pass on those interest rate reductions, if you can help homeowners and help businesses, that will help all of us get through a very difficult time."