FFL: Banks draw down £4.4bn, and lend under £500m

Graham_Devon

The funding for lending scheme (FLS) – which Osborne heralded as "credit easing" at the Conservative party conference a year ago – was dubbed a "white elephant" after the first data showed that in the three months to the end of September just £500m of lending was released, if loans being repaid are taken in to account. Drawdowns by the 35 banks and lenders signed up for the scheme, which reduces the price at which banks can lend, were £4.4bn.

Paul Fisher, executive director for markets at the Bank of England, insisted that it was "too early to use these data as a reliable indication of the impact of the FLS on lending volumes".

But Christopher Shaw, chief executive of finance provider Platform Black, said: "The choice of name has proved to be unintentionally ironic. The funding is there all right, but there's precious little lending going on. What launched as the Bank of England's great white hope risks looking like a white elephant".

And four of the big player banks, have actually reduced lending.

Yes, agreed, it's a little too early to tell how this will pan out, but that can't be used as a reason to ignore the first reports on the scheme.

What's happened to the other £4bn? Where is it?

Edit: It appears most of the £500bn has used to lend to those who take low LTV mortgage products.

http://www.guardian.co.uk/business/2012/dec/03/funding-for-lending-scheme-500m-pounds

Eellogofusciouhipoppokunu

Isn't a 'return to sensible lending' the cornerstone of certain people's arguments on here?

How do you like them apples? :rotfl:

wotsthat

If bank lending doesn't increase they'll have to pay a fee for the cash in the early part of 2014. It's far too early to early to tell but maybe they'd prefer to keep hoarding and pay the fee? Maybe no wants to borrow?

Not surprised that what has been lent has gone to the best risks - common sense really.

Graham_Devon

wotsthat wrote: »

If bank lending doesn't increase they'll have to pay a fee for the cash in the early part of 2014. It's far too early to early to tell but maybe they'd prefer to keep hoarding and pay the fee? Maybe no wants to borrow?

Not surprised that what has been lent has gone to the best risks - common sense really.

Commentator picked up on this and stated the fee is far below what they would pay for money elsewhere, so maybe it is simply a case of cheap money.

IveSeenTheLight

wotsthat wrote: »

If bank lending doesn't increase they'll have to pay a fee for the cash in the early part of 2014. It's far too early to early to tell but maybe they'd prefer to keep hoarding and pay the fee? Maybe no wants to borrow?

Not surprised that what has been lent has gone to the best risks - common sense really.

I heard a radio report the other day saying that banks want to lend, but that confidence is low that there isn't the same level of requests.

I'm sure the criteria to lend also has an impact, but it makes you wonder what is the rate this was lent at and whether there is more margin for lower lending rates.

wotsthat

Graham_Devon wrote: »

Commentator picked up on this and stated the fee is far below what they would pay for money elsewhere, so maybe it is simply a case of cheap money.

I think it probably is. Banks don't want to lend - they are under pressure to improve their balance sheets. As banker bashing continues they can't be sure that they don't need to make provision for the next state sponsored mis-selling scandal either. PPI compensation seems to be finding it's way into the economy more effectively than QE.

On the other hand the banks have to be seen to lending which explains why they are falling over themselves to attract the best risks. The ideal for any bank is to take on board a load of cheap money and out-compete the other banks to corner the market in low LTV loans. Effectively, they'll increase lending and decrease risk. Won't be very profitable though for the lender but great for those who, by luck or judgment, find themselves able to take advantage of the banks quandary in resolving their catch-22 position.

[Deleted User]

FFL was doomed to failure,after all if they dont lend out the money they get penalised with 2% interest rates...some penalty

Generali

Banks can't reduce risk and lend more simultaneously. This was always going to be the result of current international policies towards banks.

The amount that banks were holding in reserve wasn't a problem for the most part, what they were using as reserves was. It's still a problem to this day: banks are effectively being forced to hold Greek and Spanish Govt debt which is unlikely to end well.

Thrugelmir

Graham_Devon wrote: »

What's happened to the other £4bn? Where is it?

Not drawn down yet.

Only 6 lenders have actually drawn funds so far.