A total of 30 banks have signed up to the Bank of England’s Funding for Lending scheme to boost the economy, reports the Telegraph.
The banks, which together account for £1.33 trillion of lending to households and businesses, will have access to cheap cash through the scheme, the central bank said.
That figure represents around 80pc of lending in the UK economy, suggesting that the scheme could unlock around £66bn of funding for the banks involved.
Under the scheme, banks and building societies taking part can borrow an amount representing up to 5pc of their existing loans to the UK non-financial sector.
The scheme, launched by the Bank of England in conjunction with the Treasury, is designed to reduce funding costs for lenders so that they can make loans cheaper and more easily available.
Critics have warned of a deadweight effect, as banks could simply use the cheap funding to provide reduced rates to existing customers, rather than increase lending to new customers.
Last week, the British Bankers’ Association said that lending to non-financial businesses showed a £1bn drop in September to £295.1bn, while there was a 7.7pc fall in loans and overdrafts. Economists at the Ernst & Young ITEM Club, the forecaster, said that they “remain sceptical” about the ability of the scheme to stimulate lending growth.
However, others point to signs that the scheme is beginning to impact the housing market, citing the increase in mortgage approvals seen in September.
Lenders so far taking part include Barclays, Lloyds Banking Group, Royal Bank of Scotland and Santander, with building societies making up the bulk of the new additions to the list. All of the “Big Six” banks have signed up, except for HSBC.
Japan’s central bank on Tuesday launched a similar scheme, offering unlimited loans at low interest rates to lenders, in an effort to boost economic growth.
