Bank of England's cheap credit scheme to be extended -reports

LONDON Sun Apr 21, 2013 3:06pm BST

The Bank of England is seen behind holly bushes in the City of London March 15, 2013. REUTERS/Suzanne Plunkett

The Bank of England is seen behind holly bushes in the City of London March 15, 2013.

Credit: Reuters/Suzanne Plunkett

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LONDON (Reuters) - A scheme to get more credit flowing in Britain's stagnant economy will be expanded to include specialist lenders and will run for a year longer than planned, the Sunday Telegraph newspaper reported.

The Bank and the Treasury have been working on plans to extend the 80-billion-pound Funding for Lending (FLS) scheme, and the newspaper said an announcement could come as early as this week.

Chancellor George Osborne is under pressure to do more to foster growth after Britain lost its AAA credit rating - the top grade - from two agencies and the International Monetary Fund said the government should consider slowing the pace of its deficit-cutting programme.

The Financial Times reported on Sunday that Treasury officials hoped the introduction of a second stage of the FLS scheme might give the IMF reason not to criticize economic policy when it carries out an annual review next month.

Osborne said on Friday the government and the central bank would announce "fairly shortly" changes to the scheme, which provides banks and other lenders with cheap financing if they keep or raise lending to households and businesses.

The FLS was launched last year but so far it has not resulted in much more borrowing by small and medium-sized companies.

The Telegraph said the FLS, originally due to end in January next year, would be extended by a year to 2015.

The newspaper said the scope of the scheme would be expanded to include specialist institutions such as asset-based lenders, invoice finance houses and leasing firms in an attempt to ease the credit crunch still felt by small firms.

A Treasury spokesman declined to comment on plans to change the FLS beyond what Osborne had said on Friday.

Asset finance allows businesses to borrow against invoices and machinery.

Since coming to power in May 2010, the Conservative-Liberal Democrat coalition has introduced austerity measures to try and reduce a record peacetime deficit, but persistently weak growth has frustrated the government's economic plans.

(Reporting By Estelle Shirbon and William Schomberg; Editing by Erica Billingham)

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Comments (2)
farmerrobin wrote:
what is the point of giving money to the banks? they only offer to lend it out again to parties who don’t need it.It doesn’t matter whether you have collateral worth double any loan you require, they demand an income stream, but, without cash capital,how can many small businesses [builders etc.] get an income stream? The banks care not one jot for 15 or 20 years or more of previously mutually profitable trading with them–the fact is, they totally srewed up & there long standing clients who were much more prudent than they, are made to suffer on the bank’s account.

Apr 21, 2013 3:44pm BST  --  Report as abuse
arrowpiper wrote:
Why “O” why are the government making the same mistake time and again –they give money to specialist lenders to pass out ? Why ? are not these people the same type who got us into this mess?
Why cannot the government lend to business directly? Either let one of the banks go bust and put the BOE on the high street or use the dammed post office or the bank of Dave or some decent organization not the greedy self-serving twits that got us into this mess ( the banks ) or other specialist lenders ( read sharks) make borrowing cheap for company’s or people
Again the government gives money to the very people most of us despise

Apr 21, 2013 4:16pm BST  --  Report as abuse
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