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The Knimbies who say No

Funding For Lending Scheme Q2 2013 Update

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Commentary here:

http://www.bankofengland.co.uk/publications/Pages/news/2013/100.aspx

Data here:

http://www.bankofengland.co.uk/markets/Pages/FLS/data.aspx

This chart is quite useful. Nationwide clearly on the ramp up, and accelerating, Lloyds now starting to lend again in Q2 despite negative net lending in the year. RBS on the other hand looking like it's shrinking its book at a higher rate now than before.

Two thirds of all FLS drawings are split between just three companies- Barclays, Lloyds and Nationwide. The median value of FLS darawings amongst the scheme's 41 participants is just £15 million, reflecting the fact that around a third of participants having no drawings at all.

flsdatatable.jpg

It's quite interesting that the use of FLS money has been very modest over the quarter, up by £1.1Bn compared to an overall stock of £17Bn used in the three previous quarters the scheme has been in operation.

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http://www.theguardian.com/business/2013/sep/02/funding-for-lending-no-increase

lending falls £2.3bn

Funding for Lending scheme stalls in first year

Scheme to increase the flow of cheap finance to credit-starved businesses sees no increase in lending in its first year - and overall business lending to small business continues to decline

A flagship scheme to increase the flow of cheap finance to credit-starved businesses has resulted in no increase in lending in its first year.

Threadneedle Street said that despite having access to billions of pounds of subsidised credit since the Funding for Lending Scheme (FLS) was launched in the summer of 2012 net lending by banks and other financial institutions taking part in the scheme had fallen slightly.

The results of the Bank's quarterly survey show a small increase in lending during the second quarter of 2013 but the £1.6bn increase was insufficient to make up for the cumulative £3.9bn fall in the previous three quarters.

Under the scheme, UK financial institutions can obtain funding from the Bank of England at lower cost provided they pass on the benefits to households and firms.

When the FLS was launched, ministers were particularly keen to find ways of providing credit for small and medium-sized enterprises (SMEs) but the evidence suggests that the cheap funds have found their way into the mortgage market.

The Bank's overall figures for business lending – including both FLS and non-FLS participants – show that lending to SMEs continued to decline in the second quarter, although less rapidly than previously.

Paul Fisher, executive director for markets at the Bank of England, said: "The FLS is continuing to support lending to the UK economy with a range of indicators suggesting that credit conditions are steadily improving for households and firms, and FLS participants collectively expect net lending volumes to pick up over the remainder of this year."

Richard Sexton, director of e.surv chartered surveyors, commented: "The Funding for Lending scheme has bathed the mortgage market in cheaper credit, but has left the SME market parched and arid. Although net lending is flat, banks have used the scheme to lower mortgage rates, ease criteria, and introduce a wider choice of loans, which has prised open the first-time buyer market and sent house prices skywards.

"Gross mortgage lending has recovered to its pre-financial crisis levels, and looks set to remain strong. House purchase lending is 30% higher than last year, and the number of loans could hit 70,000 per month by the end of the year. The scheme has done wonders for the housing market, but the main point of it was to provide credit to SMEs, who are starved of funding and can't grow."

I don't agree with Sextons comments in the last paragraph though as pre crisis lending was 90k -110k transactions / month and gross lending is only 70% of pre crisis levels (2005 - mid 07).

Net lending has changed as a measure as most new lending is now repayment basis rather than just ~half repayment half IO.

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Commentary here:

http://www.bankofeng...s/2013/100.aspx

Data here:

http://www.bankofeng...s/FLS/data.aspx

This chart is quite useful. Nationwide clearly on the ramp up, and accelerating, Lloyds now starting to lend again in Q2 despite negative net lending in the year. RBS on the other hand looking like it's shrinking its book at a higher rate now than before.

Two thirds of all FLS drawings are split between just three companies- Barclays, Lloyds and Nationwide. The median value of FLS darawings amongst the scheme's 41 participants is just £15 million, reflecting the fact that around a third of participants having no drawings at all.

Confirmation what has been seen in the CML data from last week (and the 6 months before from CML/BBA/BSA) - it's nice when different data tells the same story.

Lending falls £2.3bn on a year ago though - mortgage lending up but business lending down.

Lloyds now ok to lend "normally" after relevant EU competition measures complied with.

Barc and NW pumping lending to oblivion

RBS + Sant still in wind down mode

HSBC sensible growth in lending as they are self funding.

What would lending look like with out FLS?:o

Edited by koala_bear

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http://www.theguardian.com/business/2013/sep/02/funding-for-lending-no-increase

lending falls £2.3bn

I don't agree with Sextons comments in the last paragraph though as pre crisis lending was 90k -110k transactions / month and gross lending is only 70% of pre crisis levels (2005 - mid 07).

Net lending has changed as a measure as most new lending is now repayment basis rather than just ~half repayment half IO.

As you say, the quote about a recovery to pre-crisis levels is a bit mystifying, it's just not true.

The object of the FLS was to prevent a decline in net lending, and I suppose a couple of billion here or there is broadly consistent with that aim in aggregate. We'll never know what would have happened without FLS of course, for my money I think FLS has had little effect but that is speculation.

Barclays and Nationwide are the only players of real clout to be net lending positive over the year, but Lloyds is turning it around too. HTB must be pushing a lot of business Lloyds' way. I'm slightly curious about RBS, it seems to be shrinking lending at a rate similar to that Santander has done over the last year.

Help to Buy is much more explosive, albeit it is facilitated by FLS to a degree of course. I've yet to find much evidence of HTB application rejections, which is pretty extraordinary since there are now 10,000 reservations, and suggests that perhaps some lessons regarding giving people large sums of money have not been learned.

Edited by cheeznbreed

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FLS may have done little for lending but it's totally mullered savings rates.

+ lots.

More money nicked from savers to further fuel the property ponzi. That alone is enough to see it extended for years to come IMO :angry:

Rates rising around the rest of the world will be used as the excuse to keep the scheme going from here on.

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As you say, the quote about a recovery to pre-crisis levels is a bit mystifying, it's just not true.

The object of the FLS was to prevent a decline in net lending, and I suppose a couple of billion here or there is broadly consistent with that aim in aggregate. We'll never know what would have happened without FLS of course, for my money I think FLS has had little effect but that is speculation.

Barclays and Nationwide are the only players of real clout to be net lending positive over the year, but Lloyds is turning it around too. HTB must be pushing a lot of business Lloyds' way. I'm slightly curious about RBS, it seems to be shrinking lending at a rate similar to that Santander has done over the last year.

Help to Buy is much more explosive, albeit it is facilitated by FLS to a degree of course. I've yet to find much evidence of HTB application rejections, which is pretty extraordinary since there are now 10,000 reservations, and suggests that perhaps some lessons regarding giving people large sums of money have not been learned.

FLS is effectively a targeted more effective QE the aim is cheap liquidity for short to medium term < 5 years. (FLS may be 5-10 times more effective than later stage QE?)

RBS and Sant - indicative than they are both equally screwed in the markets eyes i.e. similar decisions bases on same funding costs? Also a flight to quality (lower risk customers) on new / remortages?

Indeed are the lenders just currently fighting it out over the dwindling pool of buyers etc with good deposits - what happens when the number of them starts to drop?

Edited by koala_bear

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its all going to plan then.

im starting to think about moving my money out the nationwide for good. it seems odd to me that a mutual building society is participating in this insane scheme...the question i ask myself is, why?

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its all going to plan then.

im starting to think about moving my money out the nationwide for good. it seems odd to me that a mutual building society is participating in this insane scheme...the question i ask myself is, why?

I suspect they have seen a huge drop in savers' deposits.

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its all going to plan then.

im starting to think about moving my money out the nationwide for good. it seems odd to me that a mutual building society is participating in this insane scheme...the question i ask myself is, why?

400,000 mortgage customers on SVR that they are losing money on (and will continue to do so for a long time).

They need to dilute that with loads of new profitable customers on different T&Cs. If they don't they are in trouble (the alternative is to do a BoI and argue unusual market conditions - BoI changed the legacy Bristol and West T&Cs. Except NW would have 30 times more effected customers than BoI)

Edited by koala_bear

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I suspect they have seen a huge drop in savers' deposits.

simple solution to that..increase lending/savings rates....i suspect they have bigger issues like having lent money for years on houses that are really not worth what they lent..hence their apparent desire to keep the ponzi going rather than looking after their members

interpreting the fls figures a different way...

without this government backed lending...lending would have pretty much collapsed.. have we had another credit crunch and not been told?

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simple solution to that..increase lending/savings rates....i suspect they have bigger issues like having lent money for years on houses that are really not worth what they lent..hence their apparent desire to keep the ponzi going rather than looking after their members

interpreting the fls figures a different way...

without this government backed lending...lending would have pretty much collapsed.. have we had another credit crunch and not been told?

Only partially as the money markets have found other places for money to be invested - there is a element of substitution on cheaper terms by the government.

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simple solution to that..increase lending/savings rates....i suspect they have bigger issues like having lent money for years on houses that are really not worth what they lent..hence their apparent desire to keep the ponzi going rather than looking after their members

interpreting the fls figures a different way...

without this government backed lending...lending would have pretty much collapsed.. have we had another credit crunch and not been told?

It's not another credit crunch as such, the central banks have created sufficient reserves globally for commercial banks to satisfy their local reserve requirements.The problem is not liquidity but debt.

In an era of deleveraging, writedowns of toxic loans and defaults remove debt from the ledger, so new debt must be continuously created to overcome the shortfall and keep the total on a rising trend. Expanding the debt carrying capacity of the economy is not as straightforward as the Krugmanites contend, however, as the chart below illustrates. Economies simply don't behave according to neoclassical principles. Osborne's decision to interfere directly in the UK mortgage market probably reflects a similiar frustration with the failure of his various fiscal programs to generate growth.

QE3+and+credit+expansion.PNG

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its all going to plan then.

im starting to think about moving my money out the nationwide for good. it seems odd to me that a mutual building society is participating in this insane scheme...the question i ask myself is, why?

Fund growth, become too big to fail, become another parasitic organization that gets to privatize profits and socialize losses...why not?

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its all going to plan then.

im starting to think about moving my money out the nationwide for good. it seems odd to me that a mutual building society is participating in this insane scheme...the question i ask myself is, why?

I don't think they want saving....all they want is your debt. ;)

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I suspect they have seen a huge drop in savers' deposits.

One strange outcome is as the banks and building societies have dropped their rates NS and I has become competitive. The response has been for ns and i to drop their rates. At very low rates imo the decision will be simple with no rates to calculate just go with the highest protection Or lowest risk. Looking at ns and I there are few products on offer and I expect eventually it will stop aaccepting funds. Edit . This is not advice

Edited by Ash4781

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its all going to plan then.

im starting to think about moving my money out the nationwide for good. it seems odd to me that a mutual building society is participating in this insane scheme...the question i ask myself is, why?

Ive done just that this week. I still have some ISAs there, though once their rate goes down, so does the last of my Nationwide cash.

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Funding For Lending seems to have become so heavily all about mortgage lending, although it was clear from the beginning that's where they wanted to push it. You do get some stories of zombie businesses demanding more money and saying how unfair life is, especially the firms run by older types. Also complaints from hopeless startups that are very likely to fail, annoyed at not being about to borrow loads to compete against zombie competitors; including one woman who wanted something like £70K to buy (massively overpay) for an office for her starter business. :blink:

Sky News 02 September 2013: Net lending by banks and building societies participating in the Funding for Lending Scheme (FLS) has improved though small firms are still losing out. The scheme, which allows lenders to borrow money cheaply from the Bank of England, is designed to make it easier for banks to pass money on to borrowers in the economy at a time when banks are also required to strengthen battered balance sheets. The Bank said that while net lending grew by £1.6bn in the second quarter of the year, banks in the FLS had actually cut lending by £2.3bn since June 2012.
SME demand for external finance falls

31 May 13

The proportion of small-to-medium sized enterprises (SMEs) using some form of external finance - such as a bank loan or overdraft facility - fell to 39 per cent in the first quarter of 2013, according to data from market research firm BDRC Continental.

The Q1 figure represents a 2 per cent fall on the previous quarter and an 11 per cent decline since the first quarter of 2012.

.... "What seems highly likely now is that any recovery this summer is going to come largely from firms spending their own stockpiled cash, but this isn't sustainable in the long term. While three quarters are happy non-seekers of finance, there will come a point when they do need the help of lenders to grow. That could be the crunch point and be a problem in the making for years to come."

http://www.bakertillymooneymoore.co.uk/news-item/sme-demand-external-finance-falls

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Banks and building societies given £42bn of cheap credit in past 18 months - but lending to small businesses still falls

Funding for Lending lets firms borrow unlimited money for as low as 0.25%

Scheme set up in 2012 helps homeowners get mortgage but not businesses

By Becky Barrow

PUBLISHED: 22:36, 3 March 2014 | UPDATED: 23:26, 3 March 2014

http://www.dailymail.co.uk/news/article-2572526/Banks-building-societies-given-42bn-cheap-credit-past-18-months-lending-small-businesses-falls.html

Also this below; good review, but his conclusion flawed. Gov shouldn't be in the commercial business of lending to business, competing against private enterprise. Banks are shrinking their exposures for reasons. Gov has already got enough banking exposure, where it seems it's tried to influence lending, with penalties for missed targets. Too many just can't accept that firms can fail, that property can fall in value (well it could fall in value), that there needs to be a rebalancing before growth. If any business plan had any real merits, there is loads of money/debt seeking returns to back it.

http://blogs.independent.co.uk/2014/03/03/has-the-funding-for-lending-scheme-been-a-success/

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.....what security is a business without any upfront equity/value.......the value is the person/s that runs the business along with a demand for what they sell...there is more demand for housing than biscuits.....land is finite, tangible and saleable.

It is the monopolies and cartels the resources we all need, want and require that requires much needed competitive investment. ;)

Edited by winkie

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