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Consumer protection

Home/Questions and Answers/Consumer protection

Do banks actually lend money to people?

115 views November 12, 2018 November 21, 2018 cfroagents 0

Banks will no longer lend money as easily as they used to. There are stricter criteria now, it’s much more difficult, you need to have a business plan and you need to prove you’ll be able to repay the loan.

Answered by: Greek Finance Ministry

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Every state borrows money, the question is not whether it pays back the full debt but whether it is capable of repaying enough of them so that it can borrow more in the future.

Answered by: Greek Ministry of Finance

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In 2008, banks stopped lending completely.

Quantitative easing was invented so that there was enough liquidity (cash) in the system so that the banks would start lending again. It’s not just money that we put into the economy, we bought gilts that other banks and financial institutions had and that’s how we got cash into the economy.

Gilts are government bonds (government debts) which cannot easily be converted into cash. It is against European legislation to buy these from your own government, so we bought them from the market instead. So by buying gilts from financial institutions, we gave those institutions the cash, the liquidity, to be able to spend again and make loans. When the time is right, we can sell these gilts and get the cash out from the economy again.

This is real money – it’s not bank notes, it hasn’t been printed, but it’s electronic money that we created. How much of it was created depended on the Monetary Policy Committee, made up of people from the Bank of England. They decided on how much quantitative easing was needed and what the interest rates should be.

Answered by: Bank of England

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