Government should set up state bank for small businesses, says BoE rate-setter

Posen also advocates increase in quantitative easing


The government should shake off the shackles of “policy defeatism” and set up a state bank to help small firms.

That is according to Bank of England rate-setter Adam Posen, who believes that urgent action is now required to avert the “potentially lasting damage” of the recession and dig small businesses out of the current economic malaise.

In a speech to an audience of businesspeople in Gloucester, Posen said the Treasury should collaborate with the Bank of England to establish two new public institutions.

“One would be a public bank or authority for lending to small business [that] would in the first instance be choosing among loan applications already rejected by pre-existing banks.”

In addition, the collaborators should create “an entity to bundle and securitise loans made to SMEs”, reinforcing liquidity in the market.

Posen also advocated the introduction of a further £100m of quantitative easing to maintain the desired rate of inflation and prevent economic stagnation.

 

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