Funding For Lending Has 'Encouraging Start'

The Bank of England (BoE) has released the names of 13 banks and building societies taking part in its scheme to boost lending to cash-starved households and businesses.

It said it had seen an "early impact" of its Funding for Lending Scheme, which aims to increase loans by offering up to £80bn to banks at a cheap rate, lowering banks' costs.

Lloyds Banking Group, Barclays, Royal Bank of Scotland, Santander and Virgin Money are among those involved, which together account for around 73% of all lending in the UK.

In total, they have lent £1.2trn as of the end of June this year, the BoE said. The biggest single lender was Lloyds Banking Group, with £443bn of loans outstanding.

HSBC - the only one of Britain's six largest banks not to sign up - said it prefers to fund lending through customer deposits, but has not ruled out joining in the future.

The BoE's executive director for markets, Paul Fisher, said he was "confident" the scheme, launched in August, would help boost the supply of credit in the UK after an encouraging start.

"Since the scheme was announced we have seen widespread falls in funding costs across different sources and an equally wide variety of lending rate reductions," he said.

But, although borrowing rates have started to come down, the BoE warned it may not be able to prevent total lending from falling over the next 18 months because of ongoing global economic problems.

"Before its introduction, it was more likely than not that the stock of credit would contract further over the next 18 months. Perhaps it still may," Mr Fisher added.

"But any return to positive credit growth would be a better outcome than we could have previously hoped for."