BANK of England (BOE) governor Mervyn King said Tuesday there is no guarantee the central bank’s latest round of stimulus will boost lending to businesses, as figures showed borrowing by U.K. firms remains subdued.

    In a tense appearance before the U.K parliament’s Treasury Select Committee, King told lawmakers that banks remain under considerable pressure from investors to shrink their loan books and that the extra 75 billion pounds (US$120.3 billion) of BOE bond purchases may only prevent banks from reducing lending even further.

    “I cannot guarantee that it means that bank lending will rise. But I do believe that it will not fall as far as it might otherwise have done,” King said.

    The BOE’s Monetary Policy Committee voted this month to resume the central bank’s stimulus program to prop up the economy and prevent inflation sinking below its 2 percent target within the next couple of years. It bought 200 billion pounds of assets during its first bout of stimulus in 2009 and early last year.

    Lawmakers pressed Tuesday King and Deputy governor Charles Bean on why the BOE does not target its asset purchases at corporate bonds in an effort to improve the supply of credit to U.K. companies, especially small and midium-sized firms struggling to get loans.

    King said British commercial banks are best equipped to assess the credit risk of potential borrowers. (SD-Agencies)