Bank’s funding scheme triples in third quarter

THE FUNDING for Lending Scheme (FLS) saw a spike in use during the third quarter, with the amount drawn from the programme more than tripling from the previous three months, according to official statistics released yesterday.

Between July and September £5.524bn more was drawn from the system than repaid into it, a considerable increase from the £1.118bn net withdrawal during the second quarter.

However, use of the Bank of England facility is still down from the last quarter of 2012, when the scheme’s use peaked and drawings hit £9.472bn.

Lloyds’ enormous use of the system in the third quarter accounted for over half of the drawings, as the bank acquired £3bn of funding, doubling its use of FLS to date.

The second largest increase came from Coventry Building Society, drawing £850m. A spokesman from the group emphasised that less had been drawn on than planned earlier in the year, and that the building society had lent more than twice as much as it had drawn from the scheme so far.

Some institutions are unlikely to receive much more from the scheme in the future, given the Bank of England’s recent decision to refocus the FLS on small businesses from January next year.

The withdrawal of FLS from mortgage lending was the first significant step down from loose policy in the housing market.

Despite the improvement from the second quarter, some organisations are still critical of efforts to spur lending to small businesses.

John Longworth, director general of the British Chambers of Commerce (BCC), commented: “The real litmus test for the Funding for Lending scheme is whether it can really get finance flowing to small and medium-sized enterprises (SMEs), and unfortunately the improvement in credit availability is still mostly being felt by the usual suspects in the mortgage market and among large firms.”

Matthew Fell of the Confederation of British Industry concurred: “Despite overall FLS lending substantially increasing, Bank of England data shows that net lending to SMEs continues to fall so the recent move recalibrating the scheme towards business lending is welcome.”