National Loan Guarantee Scheme

House of Lords written question – answered on 8th March 2012.

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Photo of Lord Myners Lord Myners Labour

To ask Her Majesty's Government whether they will review the impact on credit availability and pricing of the proposed National Loan Guarantee Scheme against the introduction by the Bank of England of an equivalent to the European Central Bank's long-term refinancing operation.

Photo of Lord Sassoon Lord Sassoon The Commercial Secretary to the Treasury

It is important that policy initiatives are clearly linked to a particular objective. In the UK, the National Loan Guarantee Scheme aims to ease credit conditions for smaller businesses by reducing their cost of financing loans. In the euro area, the aim of the European Central Bank's long-term refinancing operations is to provide liquidity to the financial sector, following the particularly marked deterioration in market conditions for euro-area banks during the second half of 2011.

The Bank of England is independently responsible for operations in the sterling money markets. These are designed to implement the Monetary Policy Committee's decisions in order to meet the inflation target; and to provide short-term liquidity insurance to the banking system to support financial stability. At present, the Bank of England asset purchase scheme has ensured UK banks have access to a substantial amount of liquidity.

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