Third, the Bank should not take decisions that discriminate between different companies and sectors. There may well be  BIS central bankers’ speeches  3  good reasons for discriminating in some circumstances but that is a decision properly reserved to elected politicians. By buying gilts we leave the private sector to decide in which directions the money we create should percolate through the economy. Any positive impact of asset purchases will benefit all companies, large and small, through its impact on overall demand. Our programme of gilt purchases has helped large companies to reduce their reliance on the banking system and obtain finance directly from equity and corporate bond markets. In fact, the majority of Britain’s largest companies can borrow more cheaply in capital markets than the average of the largest six banks. Smaller and medium-sized companies (SMEs), however, are constrained to borrow through the banking system. And there is special concern about their ability to obtain credit – I share that concern based on my experience of meeting many such firms during visits to all parts of the United Kingdom and hearing reports from the Bank’s regional agents. We have made this point repeatedly at hearings of the Treasury Committee in Parliament. Over the past year the stock of SME borrowing has shrunk by around £ billion or 5%.
Another possibility is a shortage of high-quality safe assets,10 with countries like China accumulating reserves particularly in the form of US Treasuries. That in turn will also have increased the demand for substitutes, including the government debt of other advanced economies. But recent events in the euro area have highlighted the fact that the debt of  8  For instance, if an employer is putting aside an additional 15% of the wage bill to cover accumulating pension liabilities and the price of buying a given stream of future income rises by 20%, then he would now need to put aside an additional 3% of the wage bill to meet those obligations. 9  See Ben Bernanke (2005), “The Global Saving Glut and the US Current Account Deficit”, Sandridge Lecture, Virginia Association of Economics, Richmond, Virginia, 10 March. 10  See Ricardo Caballero, Emmanuel Farhi and Pierre-Olivier Gourinchas (2008), “An Equilibrium Model of Global Imbalances and Low Interest Rates”, American Economic Review, pp.358–393. BIS central bankers’ speeches  5  some sovereigns is not as safe as market participants thought. That has led to increased demand for the debt of those sovereigns that are still regarded as safe, including that of the United Kingdom. How long such a “safe-haven discount” persists depends not only on what happens in this country but also what happens abroad: the demand for one country’s bonds as a safe haven depends in part on how risky those of other countries are thought to be.