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King: QE doesn’t guarantee more lending

Yuan Phoon

October 25, 2011

At a Treasury Select Committee meeting this morning, he said that the QE2 programme should safeguard against a major dip in loan activity.

King 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.

“I think the action will make a difference to the amount of lending, but it certainly doesn’t guarantee that lending to the real economy is positive.”

He said that only the banks were in a position to assess credit risks for small and medium sized enterprises.

“What we have to do is to find more ways of giving incentives to the existing banks in order to lend more,” he continued.

King also told the committee that the Bank’s rate-setting Monetary Policy Committee had come close to voting in favour of more quantitative easing in September, a month earlier than QE2 was announced.

He also said tomorrow’s EU summit meeting, at which European leaders are expected to agree a solution to the eurozone sovereign debt crisis, was simply “buying time” rather than solving the underlying problems.

“It will only buy one or two years of breathing space,” he said.


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