30 lenders now ready to take state funding

 
Tim Wallace
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THE NUMBER of banks and building societies looking to take cheap funding from the government more than doubled in the last month, according to official figures published yesterday.

The Bank of England revealed another 17 have signed up to the Funding for Lending Scheme (FLS), which offers lenders cheap funds in the hope that they will increase credit to businesses and households, taking the total to 30 institutions.

Initially, each is eligible to take funding equivalent to five per cent of their stock of lending as of 30 June 2012.

If they increase lending, they will be offered more funding. But if they cut lending, the cost of the funding rises.

The largest to sign up in the last month is the Clydesdale Bank, with outstanding loans of £33.2bn.

The smallest is Metro Bank, which has £78m stock of loans as of 30 June.

Together the 17 banks’ stock of loans stands at £113.9bn, or 6.9 per cent of all lending, and if they tool up all of their initial FLS allowance it would come in at £5.7bn.

HSBC remains the biggest bank that is not taking part.

“We now expect participants to access £85-£90bn, previously £80bn-£85bn, of funding over the 18-month window, including £20-£25bn in new net lending,” said Barclays’ analyst Chris Crowe. “However, we do not expect the scheme to transform the UK credit environment, as most lenders still face balance sheet pressures, demand for credit among high-quality borrowers remains subdued, and lenders will be unwilling to lower credit standards to encourage additional borrowing.”