Bank's cheap credit scheme cuts costs of state-backed banks as their net lending drops

The Bank of England saw 18 participants in its Funding for Lending Scheme (FLS) take a total of £2bn in the second quarter (ending 30 June 2013). Total net lending was only £1.6bn in the same quarter.

Many have accused the scheme of pumping up the housing market with easy credit, a total of £17.6bn of which has now been withdrawn by 28 groups.

While many attribute house price rises to Help to Buy, only the first element of that scheme has now begun.

Lloyds, RBS and Santander UK have reduced their net lending to the economy by £22.5bn since the scheme began, with Santander's net contribution dropping by £10.4bn.

The combined reduction in lending from those two state-backed banks fell by £12.1bn, despite taking £3.75bn from the scheme.

Commenting on today’s data, Paul Fisher, executive director for markets at the Bank of England, said:

The FLS is continuing to support lending to the UK economy with a range of indicators suggesting that credit conditions are steadily improving for households and firms, and FLS participants collectively expect net lending volumes to pick up over the remainder of this year.