U.K. Business Secretary Vince Cable said he’s asked Bank of England Deputy Governor Paul Tucker to study how the central bank could alter its Funding for Lending Scheme to help small- and medium-sized companies more.
“SME lending still isn’t happening the way it should,” Cable told journalists today as he attended the Warwick Economics Summit in Coventry, England. “One of the questions for the immediate future is how the FLS could be adapted to deal with the needs of SMEs. I have written to the deputy governor to seek a meeting seeing how we can address that.”
The Bank of England started its credit-boosting plan in August as banks curtailed loans and policy makers raised doubts about the effectiveness of their bond-buying program. While the FLS has eased the flow of mortgages, it hasn’t helped business lending enough, so officials should look at ideas like that proposed by former U.K. policy maker Adam Posen for the central bank to buy bundled SME loans to increase supply, Cable said.
Bank of England Governor Mervyn King has “taken the view that anything other rock-solid gilts are not appropriate to have as part of the balance sheet” of the central bank, Cable said. “I understand where he’s coming from, but that is quite a rigorous -- some critics might say rigid -- view by the bank and more open-minded thinking about that would be helpful.”
The business secretary said that he hopes Bank of Canada Governor Mark Carney, who replaces King on July 1, is open to new ideas on how to boost the U.K’s economic recovery.
“The main change people are looking for is a genuinely open mind and a willingness to look at how monetary policy can continue to support the real economy,” he said.
In a speech earlier today hosted by the University of Warwick, Cable said the government needs to find the balance between reining in the deficit and supporting economic growth to maintain the confidence of financial markets.
He also added it’s “critical” that the U.K. should remain in the European Union and that the risk that Britain will leave the regional bloc in a proposed referendum in 2017 is no more than 5 percent.
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