Banks promised new aid in 'funding for lending' plan

about time. it was King and the chancellor whose incompetence gave Peston the s and start a scoop of a lifetime and start the run on Northern Rock. The banks are not lending? well it is hardly surprsing when you have an unguided missile like Vince Cable meddling in matters he does not understand nor does Vickers for that matter. This is no time for political point scoring maybe King is finaly beginning to smell the coffee. The man has caused our economy a great deal of damage and as such maybe he to should follow Fred into the sin bin.

This is just helping bank make more money. I bet the lending will not below the rate, more likely to be around 15%. I wonder who will get this profit??

The borrowers dont get to keep the money, they just repay it, and will borrow it cover essentials.....

If we are going to now start throwing some money at the problem, why not reduce Tax or VAT. This will put money in everyone's pocket, some need it (the same people who will take the loans!!) So this would go on the essentials, other people will Save It, others will spend it adding to our economy!!!

I think this is much more to do with repairing the banks balance sheets (as they're trying to do in Spain and other places) than it is to get the economy going.

The idea that banks will help businesses without profiting massively is naivety at best.

If the BoE had really wants to do this, they should hold a Dutch auction for the money with banks bidding, stating the margin they will legally commit to when lending the money out (which they must).

Bank quoting the lowest margin for lending the money on to businesses gets the money. Any evidence that the bank fail to honour the margin, the money gets withdrawn and the bank gets taken to court for breach of contract (which it would be, as the agreement would be legally binding in a contract).

Good point Clive.

The banks did not deliver on QE, and I have my doubts they will deliver as required now.

We do need to have some teeth put into the matter.

I thought Osborne said:

"You can’t borrow your way out of a debt crisis. "?

But I suppose yet more taxpayer money going into his banker friends bonuses is a worthy cause. Future Party funding assured.

BoE failignt o grasp the problem as usual. Whilst liquidity is a problem due to the Eurozone credit crunch (ignoring the LTRO). Banks aren't lending to small businesses as they are de-leveraging on a massive scale. If BoE lends them cheap money they will use it to replace expensive borrowing. the net new lending to SME's will not change. I knwo from speaking to contacts at RBS the previous BOE/Gov schemes such as project Merlin were used the same way, renewing an overdraft or short term credit facility was treated the same as a new to bank lend for target purposes.

The UK coporates/plcs are the ones with cash not the banks (the last thing the insolvent banks need to be doing is increasing their balance sheets). They have huge stock piles which they are failing to invest. Introducing tax breaks for investment might help or start taxing the cash piles.

MC

I think we need more than tax breaks for investment. We need direct grants administered so that the banks do not get their hands on them. Tax breaks in the current climate could lead to more savings, hoarding.

The tone of comment so far may be too negative. This move does at least represent an attempt to address the defects of QE as an economic stimulative, which is that accretions of bank reserves are being held, invested back into gilts, and/or used to reduce wholesale funding, and not to increase lending. It may be that this latest effort still falls down owing to a lack of willing borrowers perceived by cautious banks as creditworthy, but it does in the circumstances seem worthwhile to attempt to kickstart the lending process.

What is the interest rate and period the BOE is lending this money at?