The Bank of England is running out of options.
At 0.5% the interest rate tool is all but exhausted. Now the theory goes we (Mr and Mrs taxpayer) will buy bonds and debts from banks to give them a windfall and some money to lend to us mere SME business people and the people who are desperate for a mortgage.
Great news, except I doubt it will make a huge difference for the short to medium term. To quote Theo Paphitis on Panorama (BBC), "the banks are making it up as they go along".
In every "solution" there is a problem that the banks seem to use to stop taking a lending risk.
For example under the new EFG (Enterprise Finance Guarantee) scheme the banks are encouraged to lend money to SME companies and get a Government Guarantee that if the business fails 75% of the loan will be underwritten by HM Government (us).
Great you may think, but don't get excited yet,oh no!
KSA CompanyRescue has seen term sheets from those banks that have got their act together and produced them. The 25% bank "risk" is not going to be a risk at all to the banks, they hope. Why because the directors will be required to sign a personal guarantee for the 25%!
So, it seems likely that many applications will be rejected as the directors have no equity in their homes!
Let us see what happens with so-called "quantitative easing " or printing money - will the banks find new ways to mitigate lending risk to SMEs?
Now that their risk profligacy of 1997-2009 has been exposed, they seem to have turned 180 degrees and stopped taking any!