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R K

Funding For Lending Scheme Extended

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The Bank of England and HM Treasury are today announcing a one-year extension to the Funding for Lending Scheme (FLS). This extension will provide lenders with continued certainty over the availability of cheap funding to support lending to small and medium-sized enterprises (SMEs) during 2015, even in the event of stress in bank funding markets.

The FLS has contributed to a substantial fall in bank funding costs since its launch in mid-2012. That has fed through to improvements in credit conditions for households and businesses. Reflecting the significant improvements in household credit conditions, the incentives in the FLS were re-focussed towards business lending in November 2013. The extension announced today will continue to provide support to where it is most needed, by focussing the incentives in the scheme towards lending to SMEs in 2015.

The FLS extension will complement various other longer-term initiatives to improve the availability of credit to SMEs as they take root. These include: the British Business Bank’s various programmes to make markets work better for SMEs; the joint Bank of England-ECB initiative to improve the functioning of the securitisation markets, including securitisation of SME loans; the Government’s proposals in the Small Business, Enterprise and Employment Bill to mandate greater sharing of SME credit information and to require banks to share details of SMEs which have been declined finance; the Bank of England’s consideration of widening access to credit data to support the provision of credit to SMEs through non-financial intermediary channels, such as trade credit; changes to the PRA’s regulatory approach to make it easier to set up new banks; and a reduction in capital requirements for SME lending under EU legislation.

Following today’s announcement, the drawdown window for the FLS extension will remain open until 29 January 2016. Current participants in the FLS extension will remain part of the scheme unless they choose to opt out, and they will retain borrowing allowances earned by lending from 2013 Q2 to 2014 Q4. Participants will be able to earn further allowances by lending to SMEs in 2015, with such lending strongly incentivised by allowing participants to draw £5 in the scheme for every £1 of net lending to SMEs. Net lending to financial leasing corporations and factoring corporations – which can be important sources of finance for some SMEs – will continue to count towards allowances generated in 2015, pound for pound. All other terms of the FLS extension remain unchanged, with drawings continuing to be for a term of four years and attracting a fee of 25 basis points.

Although the Bank is not indemnified for the operation of the FLS, the exchange of letters published today between the Governor of the Bank of England and the Chancellor of the Exchequer shows that the Bank has sought and received an assurance from the Government that the objectives of the extended FLS remain within the Bank’s remit. The scheme will continue to be overseen by a Joint Oversight Board comprised of Treasury and Bank officials.

The Monetary Policy Committee (MPC) has judged that there will be no material impact on the stance of monetary policy. The Financial Policy Committee welcomes these changes.

Commenting on these changes to the scheme, Mark Carney, Governor of the Bank of England said: “By providing a backstop for funding for banks, the FLS has supported access to credit across the economy during an exceptional period. As the banking system has been returned to health, the need for that backstop has been reduced. The Scheme is not permanent so, as access to credit has returned to the mortgage market and large corporations, the Scheme has been tapered appropriately. The extension announced today concentrates the FLS on the one area where support remains warranted: the supply of credit to SMEs.”

Commenting on these changes to the scheme, George Osborne, Chancellor of the Exchequer said: “The government’s long term economic plan is working with the Funding for Lending Scheme playing a vital role in supporting the recovery. Now that credit conditions for households and large businesses have improved, it is right that we focus the scheme’s firepower on small businesses, which are the lifeblood of our economy. That’s also why we’ve reformed the banks, introduced the British Business Bank and are now focussing the Funding for Lending Scheme on supporting them.

http://www.bankofengland.co.uk/publications/Pages/news/2014/165.aspx

Arf

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So by extending support for business, they keep open the option to extend it to mortgage lending again as soon as it looks like HPI is starting to wane.

The Scheme is not permanent so, as access to credit has returned to the mortgage market and large corporations, the Scheme has been tapered appropriately.

...and will be un-tapered (in)appropriately at the drop of a hat.

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I thought thats what banks did...attract funds....for Lending.....or maybe they dont any more.

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I did actually vote for them last time, thinking they were talking the talk, going to do the things that were needed. Won't be making that mistake again. Really, really tired of the lies and the fantasy economics. (Labour won the seat by a few votes.)

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SME's will mean property related as well and lending to allow any SME to hold onto their land etc. So the scheme wasn't "scrapped" after all. They just told more lies.


http://

www.telegraph.co.uk/finance/economics/10480502/BoE-scraps-Funding-for-Lending-for-mortgages-to-cool-housing-market.html

If proof were ever needed it's conclusive proof that there is NO real recovery - and their long term plan is an abject failure.

Edited by billybong

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The other thing that it implies (as their long term plan has been such an abject failure) is that all the promises they've been making recently as the general election approaches are guaranteed to be reneged on IF they get in power again.

Mr Osborne's Autumn Statement tomorrow is going to be full blown delusion attempting to pull the wool over voters.

Edited by billybong

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The other thing that it implies (as their long term plan has been such an abject failure) is that all the promises they've been making recently as the general election approaches are guaranteed to be reneged on IF they get in power again.

Mr Osborne's Autumn Statement tomorrow is going to be full blown delusion attempting to pull the wool over voters.

At what point does it just become out right fraud?

I mean, there must be a line that you can't cross. I sell you 10 beans, but there's only 9 in the packet.... Bean fraud.

I promise free money and sex to get elected... and there's no sex!

Is that fraud?

Fraud is a deception deliberately practiced in order to secure unfair or unlawful gain (adjectival form fraudulent; to defraud is the verb).[1] As a legal construct, fraud is both a civil wrong (i.e., a fraud victim may sue the fraud perpetrator to avoid the fraud and/or recover monetary compensation) and a criminal wrong (i.e., a fraud perpetrator may be prosecuted and imprisoned by governmental authorities). Defrauding people or organizations of money or valuables is the usual purpose of fraud, but it sometimes instead involves obtaining benefits without actually depriving anyone of money or valuables, such as obtaining a drivers license by way of false statements made in an application for the same.

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I don't get it? I thought FLS had stopped. How can it be extended if it has ended? Does this mean they get more money or they just have more time to use the money they have? Can someone explain.

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I don't get it? I thought FLS had stopped. How can it be extended if it has ended? Does this mean they get more money or they just have more time to use the money they have? Can someone explain.

The FLS has contributed to a substantial fall in bank funding costs since its launch in mid-2012. That has fed through to improvements in credit conditions for households and businesses. Reflecting the significant improvements in household credit conditions, the incentives in the FLS were re-focussed towards business lending in November 2013. The extension announced today will continue to provide support to where it is most needed, by focussing the incentives in the scheme towards lending to SMEs in 2015.

If you recall, they changed the scheme 12 months ago to exclude new funding for lending on residential property because it turned out that where most of the funding was going (not by accident of course) and Osborne launched HTB.

Following today’s announcement, the drawdown window for the FLS extension will remain open until 29 January 2016. Current participants in the FLS extension will remain part of the scheme unless they choose to opt out, and they will retain borrowing allowances earned by lending from 2013 Q2 to 2014 Q4. Participants will be able to earn further allowances by lending to SMEs in 2015, with such lending strongly incentivised by allowing participants to draw £5 in the scheme for every £1 of net lending to SMEs. Net lending to financial leasing corporations and factoring corporations – which can be important sources of finance for some SMEs – will continue to count towards allowances generated in 2015, pound for pound. All other terms of the FLS extension remain unchanged, with drawings continuing to be for a term of four years and attracting a fee of 25 basis points.

There's more detailed papers (in the BOE website link) on my original post at the top of the thread if you want more detail, as well as the letters exchange between Osborne and Carney.

As others have said, whilst cheap funding for mortgages may no longer be included (from last November) lending in some cases for BTL may be deemed SME lending so still qualify, though I don't have the numbers. Someone else might.

Edited by R K

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If you recall, they changed the scheme 12 months ago to exclude new funding for lending on residential property because it turned out that where most of the funding was going (not by accident of course) and Osborne launched HTB.

So, it's basically just an extension of FLS business lending to Jan 2016? How much of this goes into BTL does anyone know?

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So, it's basically just an extension of FLS business lending to Jan 2016? How much of this goes into BTL does anyone know?

http://www.bankofengland.co.uk/publications/Pages/news/2014/162.aspx

(It's not easy figuring it out! I think the basic point is that FLS initially gave a bung to the banks to reduce the cost of funding existing residential lending. They actually reduced SME lending. This extension appears intended to reduce their cost of funding for SME lending, but whether or not they'll actually increase SME lending and by how much remains open to question)

Edited by R K

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As far as I've always understood it, only FLS for mortgages had been stopped. So news that FLS for business use is continuing isn't breaking news whatsoever as far as I'm concerned. Am surprised to see so many posters believing it had completely come to an end TBH. Any more of this and people might start confusing us with MSE...

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Oh well, at least we get to express our opinion in six months. To think I voted for these jokers.

Yes, but imagine Ed miliband, or, even worse, Ed Balls.

Personally, I dont care. But this is what EVERY damn person says to me.

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The other thing that it implies (as their long term plan has been such an abject failure) is that all the promises they've been making recently as the general election approaches are guaranteed to be reneged on IF they get in power again.

Mr Osborne's Autumn Statement tomorrow is going to be full blown delusion attempting to pull the wool over voters.

Many voters are already covered in wool.

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Thing must be going well to need all the taxpayer help. Didn't FFL end up being used for BTL.

and also used by property developers and construction companies (plus building professionals) including those that do still remain building houses so likely the FFL extension will apply to them as well (it might also be an incentive to Chinese builders setting up in the UK to take over what UK builders used to do). Possibly estate agents, mortgage brokers, small lenders, solicitors, accountants and so on as SMEs all reliant on house sales (chums of Mr Cameron, Mr Osborne, Mr Clegg and Mr Cable - along with the likes of Mr Miliband and Mr Ball etc when that branch is in government).

If the housing market is stagnating some easier loans to help them all get over the general election line.

Rebalancing the economy - of course :lol:

It is a turn up for the book as well as a bit of a revelation because with FFL's recent removal for mortgages along with "the recovery" (nudge nudge wink wink) there seemed to be every reason to think that the FFL remainder would be generally coming to an end rather than them needing to extend it.

So it being extended does confirm how poor the UK economy continues to be and how unlikely they will be able to afford all the "promises" they are making in advance of the general election.

Edited by billybong

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