King urges government to create “financial incentives” for small biz lending
But BoE governor condemns idea of new bank
Britain’s banks should be offered “fiscal incentives” to help small firms, according to the head of the country’s top financial institution.
Sir Mervyn King, governor of the Bank of England, said it is “appropriate” for the government to intervene to break the impasse between banks and small businesses, adding that the Treasury is “perfectly capable” of stimulating lending.
King claimed that ministers “have the instruments” to make the banks lend; however it was unclear exactly what tools and incentives he was referring to.
The governor did, however, dismiss the idea of setting up a new bank, saying he would be “very surprised” if it was able to commence operations inside 18 months.
King’s unusually abrasive views were backed up by Liberal Democrat peer Lord Oakeshott, who said: “The governor’s dead right. The problem is here and now and we don’t need a new bank in 18 months’ time.
“We need the biggest lenders, which we own, to do their jobs. They don’t need carrots. The Treasury must use their sticks at long last.”