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The Bank of England has named the banks and financial institutions that took part in a new lending scheme UK’s central bank formulated to boost the cash-starved British economy. Whilst they were named, it is up to these institutions how to allocate the funds.
Five of the six biggest lenders in the British market, namely: Barclays (LSE:BARC), Royal Bank of Scotland (LSE:RBS), Lloyds Banking Group (LSE:LLOY), Santander (LSE:BNC), and Nationwide Building Society have participated in the Funding for Lending Scheme (FLS), which was launched by BoE and HM Treasury on 13th July 2012.
Seven other institutions, including building societies as Hinckley & Rugby Building Society, Ipswich Building Society, Leeds Building Society, Monmouthshire Building Society, and Principality Building Society and banks as Aldermore Bank, Kleinwort Benson, and Virgin Money have signed up to avail of the cheap loans designed to make available funds to households and “private non-financial corporations”.
Notably, Europe’s largest bank, HSBC Holdings (LSE:HSBA) did not participate in the scheme saying the bank does not need additional funding to shore up its lending activity, BBC reported.
Shares of Barclays and Lloyds climbed 1.7% and 0.8% to 224 pence and 40.40 pence, respectively at 2:00 PM GMT, a couple of hours after the report was published.
Royal Bank of Scotland shed 0.3% of its share price yesterday to 270.4 pence, affected by new reports saying the banks’ managers purportedly engaged in influencing submission of the London interbank interest rate (LIBOR) regularly while Santander chopped off 0.2% to 494.75 pence during the same hour.
Paul Fisher, Executive Director for Markets and member of the Monetary Policy Committee and Financial Policy Committee of the Bank of England said he is confident that the FLS will help the supply of credit.
The 13 financial institutions that participated in the scheme had an aggregate loan portfolio of about £1.2 trillion, accounting for 73% of all lending in the UK.
About £80 billion of low interest yielding loans have been pumped into the said banking institutions, which are allowed to borrow at least 5% of all their existing stock of loans that may be increased in proportion to the amount of funds they lend to the public.
Mr. Fisher called the scheme “innovative” and while it provides additional funding at a low cost, he implied at a speech that banks are still required to perform the usual stringent rules when providing credit to clients under a competitive market driven by supply and demand.
