By Daniel Hunter

The country's banks have come in for heavy criticism from Bank of England Monetary Policy Committee member Adam Posen, for not lending enough to small and medium-sized businesses (SMEs).

In an interview on BBC Radio 5live's Wake up to Money Mr Posen said that banks had overreacted and said the need to increase capital reserves was not a reason to stop lending.

According to Mr Posen the cut back in lending to SMEs had been 'enormous' and any excuse that demand had decreased due to the economic circumstance was dismissed.

"Now they've overreacted, not just in the UK but worldwide, and they've cut back on all kinds of lending that could be productive," he said.

"Regulators said they want capital buffers to go up, but they don't have to up immediately, so that's partly an excuse [for banks not to lend].

"When banks say it's all about no demand [for loans], that's crazy. Fees, prices and spreads on loans going to small businesses are going up, and normally prices don't go up when demand is falling."

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