Banks 'may be offered rewards for lending'

26 October 2011

Banks in the UK may be offered rewards if they boost the amount of money they are willing to lend to small businesses.

That is according to Sir Mervyn King, governor of the Bank of England (BoE), who believes the government may try to make lending to companies a more attractive proposition for financiers through handing them financial motivation to do so.

It is well known that the Conservative-Liberal Democrat alliance sees growth in the country's small business arena as a vital factor behind the wider economic recovery.

And the BoE's chief insisted that measures to encourage banks to raise their willingness to provide loans to such firms could be on the cards.

Earlier this month (6 October), policymakers at the institution decided to boost its present programme of monetary stimulus by £75 billion, but Sir Mervyn indicated that more action could be necessary.

"Fiscal incentives can persuade banks to lend to small businesses, or use of direct ownership of the biggest lenders. Those are the obvious instruments to use," he stated.

By Tony Aynsley

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