And the Bank’s Agents have heard reports of some smaller businesses preferring to seek out non-bank alternatives for finance, including peerto-peer lending, insurance companies and investment funds to diversify their funding sources. So when assessing trends in credit supply, it is important to consider flows of lending from all sources, not just the banks. The extension to the FLS to include lending related to non-bank credit providers (including finance leasing corporations and factoring companies) recognises the importance of some of these forms of lending to SMEs. Finally, there are a number of small “challenger” banks who are successfully using the FLS to help expand and take market share from the more traditional lenders. You sometimes see the phrase “the banks are not lending to SMEs”. That is simply not true when you look into the details. The data on SME lending is not fully comprehensive nor of the best quality. But the data we do have suggest that since the launch of the Scheme, gross lending to SMEs has been around £ although repayments have been slightly higher, so the overall picture of slightly negative net lending is the difference between two much larger numbers. Within that aggregate picture there are many individual banks which have expanded their net lending to SMEs whilst others have contracted. That is partly why I have been advising business contacts to “shop around” for credit if they can.
They have reduced their budget deficits, pushed down their inflation rates to less than 2%, and brought their growth rates close to 3%. Favourable global economic conditions made it possible to create an environment suitable for the proper functioning of the system. Meanwhile, the European Monetary Institute completed the necessary preparations for launching the ECB, and transferred its responsibilities to that Bank at the beginning of July 1998. At its founding, there was a broad consensus that the ECB should be independent. There were continuing discussions about its main target, however, and even though this question seems to be resolved, sometimes it still appears on the agenda. The main point being discussed is that while price stability is specifically mentioned in the constitutional agreement as an objective of the ECB, the role of the growth and economic stability objectives is less clear. It is generally agreed that the primary task of central banks should be price stability, but some still argue that the price stability objective should not conflict but should cooperate with the growth and stability objectives. Others insist that since the existence of price stability brings about high employment and sustainable growth in the medium and long term, there is no conflict between the growth and price stability objectives. I believe that the ECB’s present policies, based on all these discussions, aim at price stability as its primary task, with sustainable growth and low unemployment as major objectives.