Bank boosts lending to ease credit squeeze

The Bank revealed it had seen an “early impact” of its Funding for Lending scheme as borrowing rates begin to come down, but warned it may not be able to prevent total lending from falling over the next 18 months as wider global economic troubles continue to weigh on markets.

The Bank confirmed 13 banks and building societies – accounting for around 73 per cent of UK lending – have signed up to the programme, which started in August by offering banks cheap funding on the condition that they increase lending to businesses and households.

Lloyds Banking Group, Barclays, Royal Bank of Scotland, Santander and Nationwide Building Society are among those on the list.

HSBC has not joined the scheme, as it uses deposits from retail customers to lend – although it said it had not ruled out signing up in the future.

Speaking at Richmond University, Bank of England executive director for markets Paul Fisher said he was “confident” the scheme would help boost the supply of credit in the UK. Banking groups – such as part-nationalised Royal Bank of Scotland – have already begun reducing borrowing rates on some of their products and easing lending terms and conditions.

Mr Fisher said: “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.”