Banks have just reported business interruption loans have doubled with more than £1bn lent to 6,020 businesses@and this has been welcomed by @RishiSunak . But there are well over 5 million businesses and we know nearly a million will run out of cash within a month.
This is nowhere near fast enough to reach businesses. If banks are doing their utmost and working through the Easter Weekend to get loans to just 0.1% of the UK& #39;s businesses, it& #39;s going to take months to get this cash out.
I& #39;m told banks are still having to approve the loans the traditional way - with the relevant manager& #39;s signature on paper. Yet technology exists, approved by regulators, that can do electronic due diligence and turn around loan applications in minutes not days.
If the government underwrote 100% of the loans up to a certain limit, it would relieve banks of most of their normal paper-based underwriting process which they have to follow because of regulations. Then they could partner with Fintechs to scale up rapidly.
@hmtreasury is worried about the risk of fraud if it underwrote smaller loans like the Swiss are doing. But the Swiss have done more than ten times the loans in a tiny fraction of the time.
The obsession with the risk of fraudulent applications is akin to Mervyn King& #39;s obsession with moral hazard in 2007 - when the Bank of England was slow to act. Yes, it& #39;s a risk - but surely the greater risk right now is unemployment rising even faster than it has been?
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