Brief: Funding for Lending Scheme Extended to Help SME Lending

HM TreasuryAs expected, the Bank of England and HM Treasury have jointly announced a one year extension of the Funding for Lending Scheme (FLS).  The program, launched back in July of 2012, is designed to encourage lending to SME’s.  To date the program has failed to live up to expectations.

The government authorities state the FLS has contributed to the decline in bank funding costs. The FLS is viewed as complimentary to other business boosting programs such as the British Business Bank’s various programmes to make markets more effective for SMEs.

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.”

George Osborne, Chancellor of the Exchequer joined in; Chancellor of the Exchequer George Osborne

“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.”

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