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13 firms sign up to Funding for Lending scheme

Thirteen financial institutions have signed up to the Government’s Funding for Lending Scheme, according to the Bank of England.

The Bank’s Monetary Policy Committee member Paul Fisher today released information on the current participants of the scheme.

The 13 lenders include Aldemore, Barclays, Hinckley & Rugby BS, Ipswich BS, Kleinwort Benson, Leeds BS, Lloyds Banking Group, Monmouthshire BS, Nationwide BS, Principality BS, RBS Group, Santander and Virgin Money. They account for around 73 per cent of all UK lending.

The scheme allows banks and building societies to exchange existing loans for Treasury bills, on which they will pay an interest rate of 0.25 per cent over the next 18 months. The Treasury hopes it will boost lending and cut rates on mortgages and small business loans.

The BoE has released details of all participants’ base stock of loans as of 30 June to serve as a benchmark for measuring the scheme’s success.

Fisher says: “The Bank cannot give details of an individual firm’s previous or new lending plans. It is for each of them to explain how the FLS enables them to support the economy. Most have already announced reductions in some interest rates or a loosening of other terms and conditions. Some will respond by lending to firms that they would previously not, because they can now earn a return that compensates for the extra risk. All these approaches will help.”

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

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