QE is not a panacea for weak lending, warns Mervyn King

The Bank of England's £75bn round of quantitative easing (QE) is no panacea for weak bank lending to the real economy, and nor is the Government's plan for credit easing, the Bank's Governor, Sir Mervyn King, has warned MPs.

In an appearance before the Treasury Select Committee, Sir Mervyn dampened expectations of a quick fix to the UK's economic ills, but he said the Bank's QE programme would prevent lending from falling as fast as it might otherwise have done. His testimony came as new figures showed households hoarding cash again, and mortgage lending remaining weak.

"I think the action will make a difference to the amount of lending," Sir Mervyn said of QE. Under the scheme, the Bank will use £75bn of new money to buy government debt, with the aim of driving down interest rates. "It certainly doesn't guarantee that lending to the real economy is positive," he said. "What I do believe is that it won't fall as far as it might otherwise have done."

Sir Mervyn said he did not believe it was the Bank's place to directly support lending to any particular sector of the economy, and punted that to the Treasury, which is drawing up its own plans to encourage banks to support small and medium-sized enterprises (SMEs). Mooted programmes include securitisation of small business loans – that is, parcelling them up for sale to investors, perhaps with a government guarantee.

But Sir Mervyn expressed scepticism that investors would back the securitisation plan in sufficient numbers. "Only the banks and people close to the individual SME know what the credit risk is," he said. "If you want to do anything effective quickly, only the banking infrastructure itself is capable of assessing credit risk."

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world