Extension to Funding for Lending Scheme announced
28 January 2015
According to the two institutions the scheme has contributed to a substantial fall in bank funding costs since its launch in mid-2012, which has fed through to improvements in credit conditions for households and businesses. The extension will provide lenders with continued certainty over the availability of cheap funding to support lending to small and medium-sized enterprises during 2015.
The drawdown window for the FLS extension will remain open until 29 January 2016. Current participants in the scheme extension will remain part of it unless they choose to opt out, and they will retain borrowing allowances earned by lending from 2013 Q2 to 2014, the Bank of England said.
Participants will be able to earn further allowances by lending to small and medium-sized enterprises (SMEs) in 2015, with such lending strongly incentivised by allowing participants to draw £5 in the scheme for every £1 of net lending to small businesses. Net lending to financial leasing corporations and factoring corporations will continue to count towards allowances generated in 2015, pound for pound. All other terms of the FLS extension remain unchanged, with drawings continuing for a term of four years and attracting a fee of 25 basis points.
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