£500m borrowed in lending scheme

A total of 35 lenders, including most of Britain’s biggest banks, have signed up to the Bank’s Funding for Lending scheme (FLS) and have drawn down £4.4bn between July and September.

The scheme was launched over the summer by the Bank and Treasury to offer lenders funding at low interest rates on condition it is passed on to households and businesses.

Alan Clarke, economist at Scotiabank, said the FLS take-up had been “encouraging” and added: “Quite whether it kickstarts the chain reaction that is required to get the economy going is less clear. Nonetheless, it is a case of so far so good with regards to the take-up of the scheme.”

Paul Fisher, executive director for markets at the Bank, said: “I am confident that the FLS will help the supply of credit.”

He added: “Since the scheme was announced we have seen widespread falls in funding costs across different sources and an equally wide variety of lending rate reductions.

“But it is too early to use these data as a reliable indication of the impact of the FLS on lending volumes.”

The figures showed that net lending by four major high street banks – Lloyds Banking Group, RBS, Santander and Co-op – had fallen in the three-month period.

But other banks, including Barclays, boosted net lending between July and September.

RBS said it has used the FLS scheme to cut interest rates on small business lending by up to 1.7 per cent to as low as 3 per cent, as well as removing arrangement fees.

A statement from the 80 per cent state-owned lender said: “We will continue to offer these attractive rates to send a clear message that RBS is open for business.”

Fellow taxpayer-backed lender Lloyds Banking Group said it intends to apply to draw a further £2bn under the scheme, following an initial £1bn drawdown in September.

The Bank recently said the FLS is helping homeowners but is yet to have an impact on businesses.