Bank of England extends Funding for Lending scheme

By Bridging Loan Directory -

 

The Bank of England is expanding the Funding for Lending Scheme, which is designed to help businesses and households.

Due to end in January 2014, it will be extended for another year to 2015.

Banks will be given greater incentives to lend to small and medium-sized businesses, and creditors other than banks will be able to participate.

Since its launch in August, the scheme has been criticised for failing to boost lending. The scheme is aimed at encouraging banks to lend by offering them cheap loans on the condition they pass them on to customers.

Bank of England figures suggest banks took nearly £14bn from the FLS between August and December last year.

However, among participating banks, lending was actually lower in that six month period, than it was in the six months before the scheme was introduced.

According to the Treasury, new incentive measures are designed to encourage banks to lend more by allowing them to borrow an extra £5 from the FLS for every £1 they lend to a small or medium-sized enterprise (SME).

In an effort to get banks to lend sooner, they will be able to borrow £10 in 2014, when the scheme is extended, for every £1 they lend in 2013.