Bank names FLS members

Names of the banks and building societies that have signed up to the Funding for Lending Scheme (FLS) have been released by the Bank of England.

So far 13 lenders have been confirmed including five out of the six largest firms with the exception of HSBC which has said it does not need to use the scheme.

The Bank anticipated that lending was more likely to decline than increase over the subsequent 18 months so the FLS was launched in July and aims to encourage more lending to the UK economy.

In the wake of the financial crisis, or in response to State Aid conditions, some banks have reduced parts of their lending activities, consistent with the continued adjustment of their business models

While such adjustments may continue, the FLS aims to encourage those banks that were planning to reduce their lending to households and companies to expand their core lending. This should mean that total lending is cut back by less than would otherwise have been the case.

Paul Fisher, the Bank of England’s executive director for markets and member of both the Monetary Policy Committee and the Financial Policy Committee, said the Funding for Lending Scheme will “do something innovative”.

Fisher emphasised that the scheme was designed to support the UK economy, not the banks.  He underlined the strong incentives the FLS creates for banks to boost lending, s every pound of additional lending increases the amount that a bank can borrow in the scheme by a pound.  Meanwhile, if a bank’s lending falls, the price of the scheme will be higher.

Fisher said: “We cannot expect every bank in the FLS to increase its stock of lending to the real economy over the 18-month [drawdown] period ... the crucial impact will be whether the FLS enables them to lend more than they would have done in its absence”.

He also stressed that it is up to the banks whom they lend to: “It is not our intention that banks put themselves at risk by making imprudent loans.”

*Private non-financial corporations