King says QE is not guaranteed to trigger bank lending

City A.M. Reporter
The Bank of England's resumption of its asset buying programme will not automatically persuade commercial banks to increase lending, though it should provide a safeguard against a major dip in loan activity, Bank governor 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," Mervyn King said on Tuesday in testimony to parliament's Treasury Select Committee.

"...It certainly doesn't guarantee that lending to the real economy is positive."

With the UK economy having barely grown since last September, the bank's monetary policy committee voted to introduce a second round of quantitative easing earlier this month.

Commenting on the euro zone, King said measures the region's leaders aim to introduce over coming days to tackle its debt crisis would only provide a mid-term fix rather than a permanent solution.

"The aim of the measures to be introduced over the next few days is to create a year or possibly two years' breathing space. The underlying problems still have to be resolved," he said.