Lloyds first in line for £1bn of funds for new lending programme

By GARETH MACKIE
Published on 20/09/2012 00:00

LLOYDS Banking Group has become the first lender to tap into the £80 billion Funding for Lending scheme (FLS), designed to ease the flow of credit to cash-strapped households and businesses.

The bank has drawn an initial £1bn from the scheme, launched in June by the Bank of England and Treasury as part of their efforts to pull the UK out of recession.

Lloyds, 40 per cent owned by the taxpayer, said it would lend the money in a matter of weeks through discounted lending to SMEs and homebuyers, with chief executive Antonio Horta-Osorio describing the £1bn withdrawal as “just the start”.

It will allow customers to apply for new business loans and hire purchase with a 1 per cent reduction in the interest rate, a discount for the full term of the loan, and a minimum loan amount of £1,000 with no maximum limit.

Fellow part-nationalised lender Royal Bank of Scotland has offered products under FLS since early August, and last week said it would target mid-sized businesses, which typically have a turnover of £25m to £500m.

The Bank of England yesterday said that FLS has the potential to reduce the cost of borrowing, but its impact has been difficult to predict because some businesses and households might be wary about taking on more debt amid the current economic uncertainty.

Minutes of the Bank’s latest monetary policy committee meeting showed it was poised to step up its stimulus measures by announcing more money printing, although members voted unanimously to keep the current stock of asset purchases at £375bn.

One member of the nine-strong committee believed there was a case for announcing more quantitative easing (QE) immediately, but it was a “relatively straightforward” decision to keep to the current bond-buying programme, which runs until November.