|Funding for Lending Scheme: Bank of England and HM Treasury Announce Extension|
The Bank of England and HM Treasury announced a one-year extension to the Funding for Lending Scheme (FLS). This extension will provide lenders with continued certainty over the availability of cheap funding to support lending to small and medium-sized enterprises (SMEs) during 2015, even in the event of stress in bank funding markets.
The FLS has contributed to a substantial fall in bank funding costs since its launch in mid-2012. That has fed through to improvements in credit conditions for households and businesses. Reflecting the significant improvements in household credit conditions, the incentives in the FLS were re-focussed towards business lending in November 2013. The extension announced today will continue to provide support to where it is most needed, by focussing the incentives in the scheme towards lending to SMEs in 2015.
The FLS extension will complement various other longer-term initiatives to improve the availability of credit to SMEs as they take root. These include: the British Business Bank’s various programmes to make markets work better for SMEs; the joint Bank of England-ECB initiative to improve the functioning of the securitisation markets, including securitisation of SME loans; the government’s proposals in the Small Business, Enterprise and Employment Bill to mandate greater sharing of SME credit information and to require banks to share details of SMEs which have been declined finance; the Bank of England’s consideration of widening access to credit data to support the provision of credit to SMEs through non-financial intermediary channels, such as trade credit; changes to the PRA’s regulatory approach to make it easier to set up new banks; and a reduction in capital requirements for SME lending under EU legislation.
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Published on our website on Dec.04, 2014