3  See Chancellor of the Exchequer: A Plan for Jobs 2020 See speech by Jon Cunliffe (2020): Financial System Resilience: Lessons from a real stress 5 See letter from FSB Chair Randal Quarles to G20 Finance Ministers and Central Bank Governors: July 2020 4  3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  Since central banks acted, markets have opened up again, allowing companies to raise finance. Britain’s companies issued more than £ of new bonds since March. A second response was also needed. The seizure of corporate debt markets meant that larger companies that normally enjoy market access were suddenly faced with uncertainty about access to that finance when it was most needed. They turned, as a precaution, to banks to bolster their cash positions. What followed was not a run on the banks driven by fear about the banks, but a run to the banks driven by fear on the part of businesses about their own access to finance. In a complete contrast to what happened in the 2008 financial crisis, bank lending shot up. Net of repayments, banks lent £ in March – more than 30 times their normal monthly net lending flow as large companies drew on committed credit lines. That threatened to overwhelm the capacity banks have to lend to the wider population of businesses. The Covid Corporate Financing Facility (CCFF), owned by the Treasury and operated by the Bank of England, was designed to alleviate that pressure.
Those losses could far outweigh the small gains they might enjoy from protecting their balance sheets in the short run.8 So lend they have. Businesses have now raised – net of repayments – more than £ from banks since February. More than £ of new lending has occurred through the 100% government guaranteed Bounce Back Loan Scheme. These 1 million loans are vital for many of the smallest businesses to bridge the disruption. But they do not help to finance the cash-flow deficit of medium and large sized companies that I described earlier. Banks have lent £ has been lent to these companies, net of repayments. Within that, there has been £ of lending approved through 55,000 loans under the CBILS scheme; a further £ through 428 loans under the CLBILS scheme. Add to that at least £ of new bond issuance and £ lent through the CCFF and these companies have raised at least £ of new debt. 6  See May 2020 interim Financial Stability Report On 11 March, the FPC reduced the UK countercyclical capital buffer rate to 0% with immediate effect, and set out its expectation that it would maintain this rate for at least 12 months.