New lending plan gets off to a shaky start

Tim Wallace
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THE GOVERNMENT’S latest plan to give banks cheap funds in an effort to boost lending to firms and households received a cautious welcome from banks when it opened yesterday.

Majority taxpayer-owned RBS accessed the “Funding for Lending” scheme (FLS) immediately, and cut mortgage and corporate loan interest rates by up to 1.6 percentage points. Lloyds, also largely owned by the state, and Barclays are both set to take part.

But many other banks held back as they continue to examine exactly how participation in the scheme will affect them, while HSBC has turned down the offer completely.

Santander said it is “supportive of the initiative as it seeks to provide support to the broader economy,” but is not participating just yet as it is “currently examining the details.”

The “challenger banks” also expressed some reservations.

The Co-op bank is “carefully assessing the impacts the scheme would have on our customers and the wider market” before deciding whether or not to participate, while Virgin Money said it is one of the few lenders increasing its mortgage lending already and will consider the scheme in due course.