A boss at one of the UKs biggest banks has said his company does not need a new multi-billion pound scheme to prevent a second credit crunch.
The Bank of England and Treasury has announced an £80 billion cash injection to banks on condition they pass it on to businesses and households in the form of cheaper loans and mortgages.
The move saw a sharp spike in banking shares although City and industry experts have warned that there is no guarantee the plan will kickstart lending.
However, Steve Cooper, vice chairman of Barclays business, said the scheme doesn’t address the core problem of companies’ reluctance to borrow, particularly in the face of a eurozone debt storm that could deepen following elections in Greece.
He said: “From a Barclays point of view I welcome it but we do not need it.
“We have liquidity of capital and equity by lending significant amounts to business.
“It is good news but from a Barclays perspective we do not need that money to lend.
“The government is doing a lot of things. I would like to see it a bit more joined up and connected.
“We expect to use the £1.5 billion from the National Loan Guarantee Scheme by the end of the summer.
“What the business community needs now is confidence.
“Confidence is damaged by a number of things like the eurozone. That is going to have a knock on effect in the UK.
“I see a robust SME community in the UK and the survival rate is pretty good.”
Mr Cooper denied the accusation that banks are not lending and squeezing businesses with high interest rates.
“If the banks take that money from this scheme, they have to lend it at the same rate.
“Banks are lending, if they thinks the business is viable and requires debt and it shows that it can repay that debt.
“Those that are not getting it are for two reasons.
“About 40 per cent of those that are refused cannot show they can pay it back.
“Twenty five per cent is when the credit rating is very poor, usually caused by poor record keeping by the business owner.
“In terms of the price, it is more expensive than it was in 2007.
“Banks have had to raise more capital and some of that is passed on to the borrower.
“But in absolute terms most business are paying less today than they were four or five years ago.
“We see a lack of borrowing caused by a lack of confidence.
“Eighty per cent of people that come to us get loans and we want to help business grow.”
Economists have cautioned that banks may simply not want to lend more, even with the carrot of cheaper funding.
Vicky Redwood of Capital Economics said: “High bank funding costs are just one challenge facing the UK economy.
“Indeed, these moves on their own will do little to reduce the effect of the eurozone crisis on UK exports or reduce the uncertainty facing UK companies.”
In his annual Mansion House speech, Bank governor Sir Mervyn King also activated facilities for an emergency scheme that offers six-month liquidity to banks in tranches of at least £5 billion a month.
The two measures are estimated to be worth around £100 billion in funding to banks.
The banking industry has been hit by higher funding costs as the eurozone troubles have escalated and have been hoarding money for fear of another worrying phase in the crisis.
Experts also hailed signs that the Bank stood ready to further expand its quantitative easing programme, which currently stands at £325 billion.
Alan Clarke, an economist at Scotiabank, said incentives for banks to loan needed to be well thought out.
“Past schemes have been conditional on banks increasing their loan books, but we have hardly seen a dramatic rebound in lending,” he said. “We need to hope that the incentive structure is better designed in this scheme.”