November 20, 2017 / 3:25 PM / in a year

UK expands lending stimulus plan as banks eye deadline

LONDON (Reuters) - The Bank of England will further increase the size of a cheap credit scheme after banks and other lenders sought to make greater use of it before a deadline at the end of February 2018.

A man walks past the Bank of England in the City of London, Britain, November 2, 2017. REUTERS/Toby Melville

Chancellor Philip Hammond said he had authorised a BoE request for a 25 billion-pound increase in the maximum size of the Term Funding Scheme to 140 billion pounds.

Britain's Chancellor of the Exchequer Philip Hammond visits an engineering training facility in the West Midlands, November 20, 2017. REUTERS/Andrew Yates

“As the end of the drawdown period approaches, participants have greater certainty over the likely size of their borrowing allowances earned from positive net lending, and we now expect the final level of drawings to exceed 115 billion pounds,” BoE Governor Mark Carney said in a letter to Hammond.

Under the terms of the scheme, banks can borrow from the Bank at a rate close to its benchmark rate, as long as they maintain or expand net lending to businesses and households.

The Bank this month increased Bank Rate for the first time in more than 10 years.

The TFS was launched in August last year as part of a broad stimulus push by the Bank to help the economy cope with the shock of the Brexit referendum decision to leave the European Union. In August this year, the maximum size of the programme was increased to 115 billion pounds from 100 billion pounds.

Reporting by William Schomberg, editing by David Milliken, William Maclean

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