Bank of England Governor Sir Mervyn King faces MPs: as it happened He says "there's no shortcut" for getting the banks to lend. He says that the smaller banks will lead the way in introducing more aggressive competition. Existing banks will then worry about market share and change their ways, he adds. He is asked how the Funding for Lending scheme will differ from its previous efforts to boost lending. Mr Cable says the new scheme creates quite a "sophisticated incentive structure." In short, the more lending banks do, the cheaper it will be be for them. Individual banks will also have to report their lending figures, he adds. Vince Cable is asked his opinion on what QE is trying to achieve. It works through a variety of mechanisms, he says, which, he admits, some people don't understand even today. Its major effect, he says, has been on sterling. [It has been] a major source of support to British exporters and manufacturers. He also says QE has also driven down the cost of borrowing for the government, but admits it has had a negative effect on pensions. "Annuities are not having a great time," he adds. Mr Cable says that £2bn of credit was disbursed to 13,000 companies via the previous National Loan Guarantee Scheme. The effects of that have been experienced in low borrowing costs [for the businesses], he says. 12.32 Jeremy Warner isn't impressed by Mervyn King's appearance in front of MPs today: King [has shown] persistent stubborness in refusing to accept any degree of responsibility for what went wrong in the banking crisis. Denial of culpability in the Libor scandal - basically on the grounds that the Bank of England was not the responsible regulator - mirrors a similar more general refusal to accept the Bank did anything wrong either in the lead up to or during the banking crisis. 12.25 Lord Turner admits that there is a "small" risk of countries exiting the eurozone. He has encouraged banks to consider the risks of Greece, Italy, Spain and Ireland leaving the eurozone, even if that risk is "very low." 12.08 King says he will put the discussion of Libor on agenda of central bankers at Basel meeting in September. Legal contracts should recognise that there may not always be a reference benchmark interest rate. 12.00 Meanwhile, on business lending Vince Cable says: We now have quite a bit of evidence for the first time in a generation of serious competition beginning to emerge in business lending. He cites the sale of Lloyds branches to the Cooperative bank, and the emergence of smaller lenders including Aldermore. Mr Cable is asked why lending to larger businesses has slowed. There is a general pattern of large businesses sitting on piles of cash Some have taken a counter cyclical view - [for example] the car industry has been investing for five, ten years ahead. But many are sitting on cash because of overall uncertainty. 11.51 Donald Kohn, a member of the interim Financial Policy Committee, is now addressing MPs. He doesn't see banks suddenly foreclosing on loans en masse even amid a rocky recovery, "but we have seen horrendous behaviour where short-term profits have overcome the long-term good banks can play in society." He adds it's a worrying thing that banks are pledging their assets as it gives them less room to borrow and "we have to monitor that closely." Tucker admits "absolutely this has a drag on the economy." 11.45 King now talking about good and bad forebearance. BoE wanted to find out how much of each there was in UK banking. Turner admits to a bias in bank lending towards bigger companies but says this can't be regulated. 11.43 Meanwhile, Vince Cable, the Business Secretary, is in front of the Business, Innovation and Skills Committee talking about bank lending and business growth. He says that bank lending is "not in great shape and I think that's not for want of trying by the Government." It's an "uphill struggle," he adds. It's a moving and difficult target and we're trying a variety of different methods to try to deal with it. 11.37 Quick recap: Mervyn King said he only knew about Libor manipulation two weeks ago. He had been very concerned about a range of areas Barclays was involved in, saying that management had "sailed too close to the wind" a number of times. He claims the Barclays board was in denial about regulators losing confidence in senior management. He says the NY Fed never produced any evidence of Libor misreporting. 11.33 BoE has been lobbied on haircuts but not on eligibility to scheme. 11.25 Fisher is asked about the Funding for Lending scheme. He says nearly 100 banks are involved in scheme, ranging from those with "a few billion" on their balance sheets to those with trillions. We are trying to put pressure on banks to lend. Companies have been afraid to go in to their banks but this should now change the conversation... If any individual loan goes bad then that's the bank problem. But you can never say there is zero risk. The scheme is designed to support the economy, I hope it will be sufficient. 11.21 King: "No one knew what to make of Libor submissions. But if everyone knew about it then why didn't anyone act? 11.12 Back to Libor, and Tucker denies talking about the rate regularly with senior people at Barclays. He admits that funding and money market conditions were discussed and "Libor was a portmanteau term for that." 11.11 Fisher quizzed on QE: "We have done necessary preparation for QE exit but can't do any more until we know circumstances of the time." 11.03 King says Barclays chairman Marcus Agius' resignation didn't change the culture at Barclays and it's the culture that matters. But Lord Turner and I felt Mr Agius had to see it through to next stage [hiring the next chief executive] and he is doing. Barclays has to create a new bank with a new culture to take it forward. The BBA had to be nudged in May 2008 to get in the right direction [on Libor] but then they did a good job. The BBA couldn't be held responsible that Libor was one basis point too high or too low. These things are extraordinarily difficult but we should try to improve things. Regulators had no support from even Parliament before 2007. Barclays had been sailing too close to the wind in a range of areas, and we should encourage a culture of reporting things that go wrong. 11.00 MPs turn to COO Jerry del Missier being promoted. Should it have been stopped? Turner: "It was not something discussed. We didn't believe we should stop it occuring because the role he was moving to didn't result in a change of position. The FSA wasn't asleep on the issue. 10.57 King: "I think there are similarities with betting in cricket, because nobody saw it. It wasn't a whole game being fixed but three or four no balls. I don't know if other markets have been manipulated. We [BoE] are not responsible for regulation of markets. 10.49 King: "If the Fed had regulatory concerns they would have shared that with the regulator [not the Bank of England]. They didn't pass any information to us that Libor was being manipulated. The Fed could have shared that with us and they did not, all we would have done was pass it on. The Fed is a regulator, we were not; the Fed asked us for advice on how to interact with the BBA. We were concerned that everyone had doubts about Libor because of the disfunctional markets. 10.46 King: "[NY Fed chairman] Tim Geithner and I met in Basel at regular governors' meeting. The biggest concern was dollar-Libor, not sterling-Libor. It was moving up and down a great deal, and it was like a thermometer, it gauges the health of the patient. When a patient is sick you want to bring temperature down but that is not the same as tampering with a thermometer. Libor almost became non-existent because banks didn't want to lend to each other. 10.42 Turner: "We were concerned about Barclays but we did not feel we had to talk to Bob Diamond until this [Libor scandal] came out. I knew that this was going to be a big public issue and the public was justified in its reaction. 10.38 King: "The first I knew of Libor wrongdoing was when the FSA reports came out two weeks ago. The NY Fed did not raise any evidence of wrongdoing with regards to Libor. None of us had any evidence of wrongdoing. Any self-reporting scheme had to have structures to report misreporting, but that doesn't mean misreporting was going on. 10.33 Paul Tucker is asked about misreporting Libor. He says the Fed put to him that there was an "eroding of credibility" in Libor. We were focused on a review of how Libor was run and constructed. We were interested in the overall view rather than techincal aspects. The revelation of deliberate misreporting [of Libor, as raised by NY Fed] did not set alarm bells ringing. But in hindsight it was dishonest. Libor was moving in a broadly expected fashion... but we were worried that underlying money markets were disfunctional. We thought Libor was flawed. 10.30 King is asked about Tim Geithner's email regarding Libor concerns. He advised Geithner to write to him with NY Fed's Libor recommendations in 2008. Tucker had urged BBA to have wide-ranging consulation on Libor in 2008. BoE had various meetings with BBA on Libor improvement. 10.25 King: "I discussed the Barclays situation with the Bank of England chief legal advisor but not with deputy governors. He told me what I could and could not say. It is possible to sail close to the wind, once, twice or even three times but when it gets to four or five times then you have to look at the captain of the bridge and we told the Barclays board of our concerns. King learnt of Agius' resignation via the BBC's website, which he says was "very odd." The board wanted him to stay on, so they were taken aback when he resigned. The proper thing for me to do was have a word with chairman so he could be conscious of concerns the regulators had raised with regards to executive management. 10.14 Tyrie says he is worried that in future people like Lord Turner can try to oust chief executives by speaking with chairmen [i.e Marcus Agius and Bob Diamond]. Remember, the BoE governor has no regulatory powers. 10.05 Proceedings are under way. Lord Turner: "The conversation I had with Barclays was about the position of Bob Diamond, the brand of Bob Diamond."