BANK of England governor Mervyn King hit out at the previous Labour government during a tense committee appearance in Westminster yesterday, and also accused banks of thwarting efforts to boost lending to small firms.
King reacted testily to Labour MP Andrew Love who had said that the Bank chief appeared “relaxed” about the UK’s economic plight.
“I am actually rather concerned about it,” King responded. He said he had told the previous Labour administration “that the scale of the recapitalisation of the banks was inadequate and their actions in making sure banks lend to SMEs was also inadequate. I made that very clear.”
The Treasury is working on a “credit easing” scheme which aims to boost lending to small firms.
However, King warned that if banks get to decide which loans to keep on their books and which to share with the government, the state will receive the worst loans and the banks will keep the best ones.
The banks opposed state involvement “because they didn’t want to share the fruits of the most profitable loans to small businesses”, King said.
Meanwhile, King’s colleague Martin Weale said last night that the Bank will likely have no reason to further expand its asset buying after the current tranche ends in May.