Funding for Lending Scheme Banks Sign Up

The Bank of England (BoE) has today announced that five of the UK’s top 6 biggest lenders have signed up to the Funding for Lending Scheme.

The Funding for Lending Scheme (FLS) has been devised to helkp stimulate economic growth by making loans for mortgages and small firms more affordable.

Lenders who sign up to the scheme are charged a very low interest rate by the Treasury and are therefore expected to pass on the beneifts of the extremely low rates to their own customers.

The more finance that is lent under the scheme, the cheaper the rate of interest from the Treasury to the lender. The borrowing rate of 1.5% charged to lenders can go as low as 0.25% if they make more finance availvable to SMEs and the public.

Lenders can borrow around 5% of the amount they currently lend under the new Funding for Lending Scheme.

Funding for Lending Scheme Lenders List

Some 13 banks and building societies have already signed up to the scheme. They are:

  • Aldermore
  • Barclays
  • Hinckley & Rugby Building Society
  • Ipswich Building Society
  • Kleinwort Benson
  • Leeds Building Society
  • Lloyds Banking Group
  • Monmouthshire Building Society
  • Nationwide Building Society
  • Principality Building Society
  • RBS Group
  • Santander and
  • Virgin Money

The most notable omission from the list is HSBC who signalled their intent not to join the scheme wehn FLS was first announced in July. HSBC’s reason was that it prefers to lend backed by customer deposits.

Around forty one building societies are also missing from the FLS lenders list. The signing up process, according to the Building Societies Association, is "complex" and could out off smaller building societies.

The Bank of England has said that the 13 signatories so far provide aorund 73% of all lending in the UK and that are confident that more lenders will sign up.

Encouraging Start

Paul Fisher, the BoE’s Executive Director, Markets, said of FLS:

“We cannot expect every bank in the FLS to increase its stock of lending to the real economy over the 18-month [drawdown] period … the crucial impact will be whether the FLS enables them to lend more than they would have done in its absence.”

Taxpayer-owned Royal Bank of Scotland (RBS) stated that it has already cut interest rates to small businesses by as much as 1.7%, saving SMEs £20 million in loan repayments. About £1 billion of discounted loans have been offered to small firms by RBS since the 1st of August.

The BoE’s Fisher added that they had seen an "early impact" from the Funding for Lending Scheme and that it was an "encouraging start".

FLS replaces the National Loan Guarantee Scheme which was launched late last year.

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