Participants in Lending Scheme Extension make draw downs of £3.2bn in Q2

Bank of England

Draw downs of GBP3.2bn were made by nine of the 36 groups participating in the Bank of England and HM Treasury Funding for Lending Scheme (FLS) Extension during the second quarter of 2014, the Bank of England announced on Thursday.

The UK’s central bank has published 2014 Q2 Usage and Lending Data for the FLS, which was launched on 13 July 2012 by the Bank of England and the UK governmental department HM Treasury. The FLS was initiated to encourage banks and building societies to boost their lending to the UK real economy. Under the scheme, funds are provided to banks and building societies for an extended period, with the price and quantity of funding provided linked to lending performance.

An extension to the FSL was introduced on 24 April 2013. This extended the scheme for one year and allows participants to borrow from the FLS until January 2015. It also provides incentives to boost lending to small and medium sized enterprises (SMEs). Participants are able to draw GBP5 in the Scheme for every GBP1 of net lending to SMEs and the lending data shows that a number of FLS Extension participants expanded their lending to SMEs in the second quarter of 2014. During the period 1 January 2014 to 31 December 2014, participants in the FLS Extension can earn additional borrowing allowances for positive net lending to businesses.

According to the Usage and Lending Data report, net lending by FLS Extension participants to SMEs was slightly negative at -GBP0.4bn in the second quarter this year, but was less negative compared to previous quarters. Negative net lending to large companies was also recorded as -GBP3.5bn, while net lending to all businesses, including eligible non-bank credit providers, and was -GBP3.9bn.

The data also revealed that participants repaid GBP0.8bn from the first stage of the FLS, which takes total outstanding drawings to GBP45.7bn.

Since 1 January 2014, overall net lending to businesses of all sizes has reportedly generated additional borrowing allowances of GBP4.7bn, which have been spread across 12 participants. There was also an improvement in aggregate net lending to private non-financial corporations (PNFCs), which includes lending by banks and building societies not participating in the FLS, during the second quarter of 2014.

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