Local Lib Dem Euro MP Sharon Bowles’ radical plan to make lending to SMEs more attractive

SE England Lib Dem MEP Sharon Bowles is regularly named as one of the most influential Members of the European Parliament, where she plays a leading role in responding to the Eurozone financial crisis. Now that both the UK and the EU are fretting that SMEs are getting squeezed by bank deleveraging, Sharon is proposing a radical plan to make lending to SMEs more attractive.

Sharon Bowles said: "A way of stopping deleveraging would be some kind of flat capital charge, instead of a risk weighting approach to the banks' portfolio of SME lending. That might be better than reducing risk at a time when risk is actually increasing, and easier to measure."

"A fixed charge would apply whether there was SME lending or not. This would make it better to lend and make money, with banks having to determine relative risks like it used to be. However, there might need to be an upper limit to stop stupid lending."

"When it comes to risk weighting for hedging, we could look for rule changes that at least balance the preferential treatment that is given to synthetic hedging through derivatives. We need to channel money, including in banks, into the real economy."