–BOE Gov. King: FLS Should Flow Through to Markets in 2013
–Quantitative Easing Should Affect UK Output ‘Later in 2013′

By Claudia Hirsch

NEW YORK, Dec. 10 (MNI) – Bank of England Governor Sir Mervyn King
Monday said the central bank’s Funding-for-Lending Scheme should have a
meaningful impact on the mortgage market next year and is already
lowering banks’ lending costs.

“We think this won’t feed through to lending activity till 2013,”
King told a luncheon gathering of the Economic Club of New York,
referring to the BoE’s FLS that provides cheap funding to banks that
boost their net lending. The scheme is underwritten by the Treasury.

“The existence of this scheme has led to a sharp fall in bank
lending costs already,” King said. In total, the FLS scheme will do a
“great deal to help” both small-business lending and mortgage finance,
he added.

King said that the Central Bank’s Stg375 billion asset purchase
program, created to combat stagnant UK output and prevent a “damaging
contraction” in the money supply, should also bear fruit next year.

“I think we’ll see the impact of that on the economy later in
2013,” King said of the BoE’s quantitative easing.

For now, UK output is seeing flattening from energy prices,
Eurozone problems and the general “black cloud of uncertainty” that
includes the so-called fiscal cliff threat in the U.S., he said. He
described his nation’s GDP as having “zig-zagged” for more than two
years, yielding a roughly steady net result.

Turning to monetary policy, King said that he and his Monetary
Policy Committee colleagues “simply do not know what we will be deciding
six months, 12 months, two years from now,” but transparency is all.

“We’d rather talk about our actions in a way that people are
confident that they understand how we would respond to events as they

On regulatory issues, King said global authorities are “well on the
way” to devising a “strong framework” for orderly resolution of
cross-border banks previously deemed too big to fail. And regarding the
eventual reform of, or replacement for, the scandal-ridden LIBOR, he
said it will be crucial to craft clear rules for reporting rates in
illiquid market conditions.

–MNI New York Bureau, +212-619-6439; email: chirsch@mni-news.com

[TOPICS: M$B$$$,M$$BE$]