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| Banks reduce loans, in spite of Funding for Lending | Banks reduce loans, in spite of Funding for Lending |
| (35 minutes later) | |
| The number of loans being offered by banks has continued to fall in spite of the Funding for Lending Scheme (FLS). | The number of loans being offered by banks has continued to fall in spite of the Funding for Lending Scheme (FLS). |
| The scheme, which began in August last year, was designed to encourage banks to lend more money, both to individuals and businesses. | The scheme, which began in August last year, was designed to encourage banks to lend more money, both to individuals and businesses. |
| But the Bank of England has announced that net lending fell by more than £2.4bn in the final quarter of last year. | But the Bank of England has announced that net lending fell by more than £2.4bn in the final quarter of last year. |
| However, UK banks have taken up nearly £14bn since the scheme started. | However, UK banks have taken up nearly £14bn since the scheme started. |
| Lloyds was amongst the banks that lent less, while Barclays lent more. | Lloyds was amongst the banks that lent less, while Barclays lent more. |
| "Some banks are reducing parts of their lending activities, consistent with the continued adjustment of their business models in the wake of the financial crisis, or responding to state aid conditions," said the Bank. | "Some banks are reducing parts of their lending activities, consistent with the continued adjustment of their business models in the wake of the financial crisis, or responding to state aid conditions," said the Bank. |
| But the Bank said that Funding for Lending should encourage banks to cut their lending by less than they otherwise would have done. | But the Bank said that Funding for Lending should encourage banks to cut their lending by less than they otherwise would have done. |
| "FLS should encourage those banks that were planning to reduce their lending to households and companies in aggregate to expand their core lending such that the total is cut back by less than would otherwise have been the case," it said. | "FLS should encourage those banks that were planning to reduce their lending to households and companies in aggregate to expand their core lending such that the total is cut back by less than would otherwise have been the case," it said. |
| In total, £80bn is being made available to banks at reduced interest rates, but only if they guarantee to lend that money on to Britain's small and medium-sized businesses, as well as individuals. | In total, £80bn is being made available to banks at reduced interest rates, but only if they guarantee to lend that money on to Britain's small and medium-sized businesses, as well as individuals. |
| Homebuyers benefiting | Homebuyers benefiting |
| In recent weeks, there have been some signs that Funding for Lending was feeding though into the mortgage market, thus helping to cut the price of home loans. | In recent weeks, there have been some signs that Funding for Lending was feeding though into the mortgage market, thus helping to cut the price of home loans. |
| Previous figures from the Bank have suggested that average rates have fallen to 3.65%, as a direct result of Funding for Lending. | Previous figures from the Bank have suggested that average rates have fallen to 3.65%, as a direct result of Funding for Lending. |
| Several lenders have cut rates. | Several lenders have cut rates. |
| But lending to businesses has shown little sign of revival, with the industry saying it will take longer for FLS to feed through into business loans. | But lending to businesses has shown little sign of revival, with the industry saying it will take longer for FLS to feed through into business loans. |
| Last week, the Bank's deputy governor, Paul Tucker, admitted that the majority of loans funded by FLS had gone to homebuyers rather than small and medium-sized businesses. | Last week, the Bank's deputy governor, Paul Tucker, admitted that the majority of loans funded by FLS had gone to homebuyers rather than small and medium-sized businesses. |
| Speaking to MPs on the Treasury Select Committee, he hinted that the Bank was considering "extraordinary" policies to encourage more business lending, including the idea of charging High Street banks a negative interest rate. | Speaking to MPs on the Treasury Select Committee, he hinted that the Bank was considering "extraordinary" policies to encourage more business lending, including the idea of charging High Street banks a negative interest rate. |
| This would encourage banks to lend cash to small firms, rather than deposit it with the Bank of England, which would cost them money. | This would encourage banks to lend cash to small firms, rather than deposit it with the Bank of England, which would cost them money. |
| Shops hard-hit | Shops hard-hit |
| It is also being claimed that the retail sector has been unduly hit by a failure to grant business loans. | It is also being claimed that the retail sector has been unduly hit by a failure to grant business loans. |
| Accountancy firm Wilkins Kennedy LLP said banks had cut the amount they lent to retailers by 5.7% in the year to the end of December 2012. | Accountancy firm Wilkins Kennedy LLP said banks had cut the amount they lent to retailers by 5.7% in the year to the end of December 2012. |
| Over the last three years, it said loans to High Street shops had fallen by more than 18%. | Over the last three years, it said loans to High Street shops had fallen by more than 18%. |
| Recent casualties in the High Street have included Comet, Jessops, Blockbuster and Republic. | Recent casualties in the High Street have included Comet, Jessops, Blockbuster and Republic. |
| "The recent retail sector insolvencies will have added to the view amongst banks that they are still over-exposed to this struggling sector," said Anthony Cork from the firm. | "The recent retail sector insolvencies will have added to the view amongst banks that they are still over-exposed to this struggling sector," said Anthony Cork from the firm. |
| Are you a home buyer? Do you own a small business? Have you struggled to get a loan? Please send us your comments and experiences. |