Mervyn King (bank of england governor)
QE will not guarantee rise in bank lending believes Mervyn King
Posted: 25th October 2011
Bank of England governor Mervyn King believes that despite more money being pumped into the UK this will not guarantee an increase in lending by commercial banks.
Following the Bank of England’s intervention earlier this month injecting a further £75bn into the economy in a bid to bolster the UK's recovery, Mr. King told MPs that the bank had not waited too long to take action and that he thought lending would not fall as fast it would have done, had no action been taken.
Speaking to the Treasury Committee on the Bank's quantitative easing (QE) programme he said "I can't guarantee that it means that bank lending will rise, but what I do believe is that it won't fall as far as it might otherwise have done,"
He added "Only the banks are in a position to assess credit risks for SMEs [small and medium-sized enterprises]. What we have to do is to find ways of giving incentives to the existing banks in order to lend more."
The Bank had previously pumped a staggering £200bn into the economy by buying assets such as government bonds. This was aimed at boosting lending by commercial banks with many commentators asking where is the benefit of this, other than the bank’s balance sheets.
Many believe that the banks have had too many incentives already with little progress made within the SME engine room of the UK economy.