Comment: Bank of England is right to pull out all the stops to help lenders

REUTERS

They’re going to have to start calling it the Listening Bank.

Andrew Bailey, new governor of the Bank of England, has been doing everything right in his first week.

First, last night’s resumption of quantitative easing to help bring some stability to bond markets.

Then, today’s relaxation of the rules banks have been howling about while they battle the biggest financial crisis since 2008.

Cancelling the stress tests they have to go through every year was a gimme. You don’t hold a fire drill in a burning building.

The tests take up huge manpower at a time when banks need to be all hands to the pump to implement Rushi Sunak’s project to get loans into businesses.

For, while it’s one thing to say: “Here’s a £300 billion overdraft, chaps, just pop to the bank and they’ll sort it for you,” it’s quite another thing to implement it.

As you read this, thousands of people in banks’ finance departments are talking clients through the alien process of issuing commercial paper, the mechanism the Chancellor is using to get the loans out. Tesco might be used to it, but your mid-cap widgets maker certainly isn’t.

Added to which, banks are having to wrestle with the welter of other government support schemes for SMEs.

How you spread the risk of all these loans between the bank and the Government is a Covid-like headache.

Most heartening is that the Bank appears to be heeding bankers’ pleas for respite to the new IFRS 9 rules demanding they set aside capital to cover for bad debts even before the client has fully defaulted.

The rules haven’t been postponed altogether (they should be) but reading between the lines, it appears the Bank is taking a more relaxed approach.

That should allow banks to lend more money to the businesses who so desperately need it. Bravo.