Bank of England deputy governor says small business finance is still an issue

Charles Bean yesterday admitted that improving the availability of finance for small enterprise was an issue, but said it was difficult to devise a scheme to create more loans more cheaply.

While Mr Bean said capital markets and corporate bonds used by large companies have been 'healthy' in recent years, he said it was a different picture for small buisnesses.

'The banks have been wary about lending to those sorts of businesses because they see them as risky in the current climate,' he said.

'It is true that certainly during the worst of the financial crisis a lot of banks started being much more difficult in dealing with their customers even though customers might have a long track record. We did hear stories of exorbitant fees being charged by the banks.'

But he conceded that banks were businesses trying to repair their balance sheets and they were in a difficult position themselves.

He said they would wait and see how effective the government's loan guarantee scheme was.

He added: 'I do think it is worth saying it is difficult to devise scheme which has the desired affect of generating more loans more cheaply for the businesses that you want to try and reach because it really does have to be done through the banks. They are the ones with the network and credit evaluation facilities and things like that. You need to change the incentives for the banks to make them more willing to lend to some of these sorts of businesses.'