BoE executive calls for banking reform for small business lending

One of the top officials at the Bank of England (BoE) has called for sweeping changes to be made to the British banking system to aid the growth of small and medium-sized enterprises (SMEs).

Andrew Haldane, who is executive director of financial stability at the BoE, said that smaller businesses would benefit from there being more medium-sized banks and lenders, who would become natural lenders to businesses on their scale.

He said that the difficulty that smaller businesses have in obtaining funding is one of the main drags on the British economy.

"It needs structural reconfiguration of the banking industry to ensure that SMEs have the financing they need to be tomorrow's growth," Haldane told a specialist business conference this week.

Haldane acknowledged that the government-run loan guarantee scheme that Chancellor George Osborne is planning to present in his 2012 budget next month is a step in the right direction, but there needed to be more long-term, government-independent changes.

"We have a small number of very large banks and a quite large number of small banks and a missing middle," he added. "It is the missing middle of medium-sized banks that would be the natural lenders to [small businesses]."

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