You are here: Home - News -

BoE floats extending Funding for Lending to non-banks

by:
  • 26/02/2013
  • 0
BoE floats extending Funding for Lending to non-banks
The Bank of England deputy governor Paul Tucker has floated the idea of extending the Funding for Lending Scheme (FLS) to non-banks and has expressed concern that the scheme is failing to reach businesses.

Banks and building societies are able to use the scheme to boost their borrowing but other lenders, such as Precise Mortgages, are unable to take part.

The FLS is aimed at both residential and business borrowers and Tucker, speaking personally, said that he felt money from the Funding for Lending Scheme was failing to reach businesses.

“Small and medium sized businesses are the lifeblood of the productive side of the economy,” he told the Treasury Committee.

“I am worried, as our others, that our current battery of credit policies might not be reaching as far into the SME sector as they might.”

He added that a solution to that issue could be extending the scheme to non-banks in the future.

“Not all lending to small firms in the economy comes from banks, it also comes from non-banks.

“I think we should have a think about can we harness non-bank lenders in some way, possibly via the banks.”

Fellow deputy governor Charles Bean, also speaking to the committee, added that he was happy with what the scheme had achieved and rejected calls to alter its parameters.

“It is not a scheme which lends itself to continuous tweaking in the same way in the same way you might with the base rate or quantitative asset purchases. What the FLS does is supply banks with funding cheaper than they could get in the market.

“We also put in extra incentives to encourage banks to lend more than they otherwise would have done. As far as banks are concerned they want some certainty with regards to the pricing of the scheme, and it wouldn’t be constructive of us to be tweaking the parameters month to month.

“If it was the case that we’d got the calibration of the scheme wrong we would see if we needed to change something. But frankly the way it is working at the moment is pretty much as we expected it to.

“We have seen the effect on funding costs we wanted to see, it has largely passed through to rates being charged, particularly on household residential mortgages.”

Tucker later raised the prospect of the Bank of England following Denmark in temporarily introducing negative interest rates to further boost lending and support the economy.

“This would be an extraordinary thing to do and it needs to be thought through carefully,” he said. “I hope we will think about whether there are constraints to setting negative interest rates.”

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
  • RT @thewritertype: Thoughts and prayers with Americans heading to their new partner’s family home for Thanksgiving.
  • RT @VickyHartleyMS: The Budget 2017 roundup - all the top mortgage and housing headlines - Mortgage Solutions https://t.co/tU2bT2W3p9 via @…
  • RT @VickyHartleyMS: Budget 2017: Fintech competition launched to develop FTB rent history-mortgage affordability tool - Mortgage Solutions…
Read previous post:
Charles Haresnape Aldermore Bank
Aldermore to offer broker rate and review service

Aldermore has announced the launch of an interactive service that will allow consumers to pose questions to the bank and...

Close