Which in reality amounts to the same thing as negative interest rates given the rate of inflation. Not for the banks of course in terms of being charged by the B of E but for the rest of us.



He needs to stop making out the economy is totally up the creak as well just to cover his mistakes if he wants confidence to return. It used to be "If we don't do this we will be just like Greece" and now he's lost the AAA rating it is "Look the economy is just as bad as I said!".

There is, google "SME Finance Monitor" for figures on stuff like this.

The latest figures are for Q3 2012, in the year leading up to this, 10% of SMEs looked to borrow.

Of those that want to borrow, most do get finance to be fair, but 24% of overdraft applicants and 35% of loan applicants end up unable to get finance.

A lot of SMEs aren't that bothered about growing so they don't look to borrow anyway as they are just trying to tick along, but the engine of growth for the economy is the SMEs that are looking to expand as these are the ones that create employment and also innovate new products etc, these are the ones more likely to be looking for finance so whilst tighter credit conditions only affect a small number of firms they affect the important ones.

Also although banks have plenty of money to lend they are facing higher capital adequacy requirements due to regulatory changes so they have to have stronger balance sheets, which is good in terms of the safety of the banking sector, bad in terms of lending to SMEs as SMEs are generally a riskier asset class.

However I do get cautious when people say they whole problem is banks not lending to SMEs and once we solve lending we will sort out problems....banks have to lend responsibly and if they don't see credible signs of demand they won't lend. Unless there is either an increase in demand from exports (unlikely) or from government spending, there's not going to be much to give lenders confidence that prospective borrowers are going to be a good bet.

If they had a large enough negative interest rate for it to leech through to Joe Public, I wonder how long it would take Barclays to pay off my overdraft for me?

Never going to happen.

It'll never happen because, for instance, contracts like the mortgage deal I have with Nationwide (who I'd recommend as a building society) are written to ensure that it'll never happen, my base rate mortgage is set at 2% above the BoE base rate with an absolute minimum of 2.5% (which is where its at now, I think), so no matter how low the BoE go now my mortgage rate won't reduce any further.

New mortgages with Nationwide are even tighter with a floor of around 3.5% I believe.

Not only that the proposal is to split rates and not reduce Base Rate but only the rate the BoE give / take from banks.