A worrying side effect of nationalisation of banks, even if only partially, is the fear that UK banks will become introverted. In other words, they will only lend money within their own borders.  Already signs are showing that banks in Europe are only lending to each other. This also appears to be the trend developing in the United States.

In a recent statement, UK Prime Minister Gordon Brown expressed his fears that this form of "capital protection" could further intensify the financial stagnation going on in World banking.

Brown stated his view that financial isolationism  can create a very obvious harm to the banking system, in that if  the public or business sector are not allowed access to alternative sources of finance, then the economy of that country is very liable to stagnate. The Prime Minister added that the signs were that this trend was beginning to be observed in a few European nations, especially those who had just joined the EEC.

Adding strength to the growing fears of the spread of global financial isolationism is the barely disguised fact that banks in the US and Japan are gradually reducing and restricting their lending levels to some  of their major and long lasting European based corporate clients.

The strategy of developed world bond markets seems to be more and more and more appealing but only when applied to the most financially sound companies whilst waving a fond farewell to subsidised interest rates.

The thinking behind the bond issuance scheme is that companies will issue bonds for their long term borrowing needs only, with their short term finance needs being handled local money markets in terms of loans rather than overdrafts.

The ability to issue bonds looks to appear the best means to ease long term cash flow problems, encourage investment.  As far as the banks are concerned, by lending against bonds and not potentially "toxic" assets they will be able to issue loans with increased impunity.