If Bank Would Only Return to Old-Fashioned Lending Route

Published in the Financial Times 17 October

From Mr Richard Raeburn.

Sir, With reference to your report "ECB set to ‘give plumbing system a reboot’ " (October 16): this action to accept a much wider range of collateral from commercial banks is precisely what the Bank of England would achieve if it were prepared once again to channel lending to companies through the old-fashioned, proven route of bankers’ acceptances (see John Grout’s letter, "An eighties revival could be the future of liquidity", October 9).

Dematerialisation may have dismantled the structure but why – at a time when all hands must be on the tiller – is more consideration not being given to a rapid reintroduction of the old system?

Lou Crandall of Wrightson Icap ("Armageddon fears ease but lending needs to begin again", October 16) is quoted as saying: "There are almost no natural lenders in the [unsecured] term money markets apart from money market mutual funds" but this one-, three-, six-month range is a key element in corporate funding and the pricing of debt.

Corporate Britain needs cash to flow from where it should not be – at the central bank – to where it should be, refinancing companies. Without further radical action, it is quite possible we will witness the collapse of a solvent but illiquid company.

Richard Raeburn
Chief Executive
Association of Corporate Treasurers
London EC2, UK

See also Reintroduction of bankers’ acceptances market