Regulations that potentially constrain lending to small businesses should be eased when the UK economy is suffering, according to a director at the Bank of England (BoE). The Financial Times said that the volume of small business lending in the UK is shrinking by about 10%a year, with banks blaming a lack of demand and businesses saying loan rates are too expensive. But Andrew Haldane, the executive director of financial stability at the BoE, believes that the rules governing how banks calculate risk weightings – which show how much capital is required to back a loan and therefore how costly it is to provide – should be relaxed when economic growth needs boosting. He told the newspaper: “There is a strong argument for making risk weights dynamic and real-economy focused. At present, they are calibrated to the risk (posed) to a bank. In future, they need to reflect returns to society.” The call from Haldane came as research by The Daily Telegraph, found that small businesses applying for a flagship innovation funding programme have seen their chances of success collapse following a decision to "front load" the distribution of grants.

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