SLOW BIRTH OF STERLING COMMERCIAL PAPER
Margaret Thatcher's Treasury and the Bank of England have largely failed in their attempts to create an active sterling debt market for corporate borrowers. Since the removal of UK exchange controls in 1979, the UK domestic markets have remained stifled by regulation and the failure of the authorities to agree on their objectives. But the introduction of a sterling commercial paper market may herald a more successful era.
The merchant banks were disappointed by the absence of any provision for such a market in the Chancellor of the Exchequer's budge speech of March 18; they had two or three deals arranged and ready to go, including one for a US name. But while the authorities are for the time being not unhappy to see the level of bank lending stay relatively high in the context of monetary growth targets, the argument still stands that the broader implications of the creation of an inter-corporate short-term debt market make it only a wuestion of time before it is announced.
As from April last year, an amendment to the UK Banking Act allowed private sector borrowers to issue one to five-year sterling notes.