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| Bank lending scheme details due | Bank lending scheme details due |
| (40 minutes later) | |
| Details of a scheme aimed at boosting lending by banks are to be unveiled by the Bank of England and the Treasury. | Details of a scheme aimed at boosting lending by banks are to be unveiled by the Bank of England and the Treasury. |
| The aim is to make billions of pounds of cheap funds available to banks but only if they use the money to boost loans to businesses and consumers. | The aim is to make billions of pounds of cheap funds available to banks but only if they use the money to boost loans to businesses and consumers. |
| The move is part of a raft of measures taken to try to increase lending. | The move is part of a raft of measures taken to try to increase lending. |
| But this is the first initiative which makes loans to banks conditional on the money being passed on through mortgages or business loans. | But this is the first initiative which makes loans to banks conditional on the money being passed on through mortgages or business loans. |
| The central bank could make £80bn available if High Street banks increase lending by 5%. | The central bank could make £80bn available if High Street banks increase lending by 5%. |
| Sir Mervyn King, the governor of the Bank of England (BoE), announced the Funding for Lending scheme last month in his Mansion House speech. | |
| Crucial to its success will be whether it really does persuade banks to make affordable credit widely available. | Crucial to its success will be whether it really does persuade banks to make affordable credit widely available. |
| Analysts suggest banks have been reluctant to lend not only because they need to strengthen their balance sheets, but also because of economic uncertainty. These factors have also pushed up the cost of borrowing. | |
| But CBI director general John Cridland said he thought the new scheme could make a difference. | |
| "There is a real incentive for the banks because the banks can get cheaper money, but only if they lend it on," he said. | |
| The British Chambers of Commerce said it thought the scheme would bring down interest rates on loans and mortgages, but added that strict conditions, ensuring the banks lend the new funds out, were crucial. | |
| "I am not convinced they can prove that is the case," said Adam Marshall, the BCC's director of policy. | |
| Central bank efforts | Central bank efforts |
| The new scheme comes at a time when worsening conditions in the eurozone are making it harder and more expensive for banks to borrow. | |
| Sir Mervyn told the BBC this week that the eurozone debt crisis had created "a great black cloud of uncertainty" hanging over global business. | Sir Mervyn told the BBC this week that the eurozone debt crisis had created "a great black cloud of uncertainty" hanging over global business. |
| Last week, the central bank announced it would pump a further £50bn into the economy over the next four months through its quantitative easing (QE) programme, taking the total stimulus to £375bn. | Last week, the central bank announced it would pump a further £50bn into the economy over the next four months through its quantitative easing (QE) programme, taking the total stimulus to £375bn. |
| QE aims to boost the economy by buying assets such as government bonds, in an attempt to increase lending by commercial banks. | QE aims to boost the economy by buying assets such as government bonds, in an attempt to increase lending by commercial banks. |
| The BoE has also recommended relaxing rules on liquidity reserves, so that banks can tap into the billions of pounds held on their balance sheets to use for lending. | The BoE has also recommended relaxing rules on liquidity reserves, so that banks can tap into the billions of pounds held on their balance sheets to use for lending. |
| And at the end of June it held its first £5bn monthly auction under a six-month loan facility programme, which provides banks with access to cash at cheap rates, should they encounter any short-term funding difficulties. | And at the end of June it held its first £5bn monthly auction under a six-month loan facility programme, which provides banks with access to cash at cheap rates, should they encounter any short-term funding difficulties. |
| Analysts have suggested there could be further stimulus measures on the way as the BoE tries to kick-start the UK economy, which shrank by 0.3% in first three months of this year and by 0.4% in the final quarter of 2011. | Analysts have suggested there could be further stimulus measures on the way as the BoE tries to kick-start the UK economy, which shrank by 0.3% in first three months of this year and by 0.4% in the final quarter of 2011. |
| Do you run a small business? Have you tried to get a loan? What do you think of this scheme? Send us your comments using the form below. |