Cash-rich banks still won’t lend to families and firms despite borrowing 4.4billion from Bank of EnglandFigures are first insight into success of Government's lending schemeScheme lets banks borrow for 0.25 per cent as long as they maintain lendingMust use money to lend to the 'real' economy such as small firms
02:02 GMT, 4 December 2012
The figures are the first insight into the success of the Government and the Bank’s much-hyped ‘Funding for Lending’ scheme, aimed at solving Britain’s lending crisis.
One expert yesterday joked the name was ‘unintentionally ironic’ because there is ‘precious little lending going on.’ Under the scheme, banks and building societies can borrow an unlimited amount of money for as little as 0.25 per cent as long as they maintain, or increase, their lending.
They must use the money to lend to the real economy, such as small firms and homeowners or first-time buyers who need a mortgage.
Cash-rich banks have barely increased lending to families and firms
The figures, published yesterday by the Bank of England, show a total of 4.36billion was borrowed between the launch of the scheme on 1 August and the end of September.
But net lending – the total amount handed out to families and firms, excluding the amount paid back – rose by a paltry 496million during the three months to the end of September.
To make matters worse, the Bank’s figures show some of the worst culprits are the banks which needed taxpayers’ money to survive the financial crisis.
At Lloyds Banking Group, net lending plunged by 2.77billion, and it fell by 642million at the Royal Bank of Scotland, owner of NatWest.
Yesterday the Bank insisted it is too
early to judge the success of the scheme, while banks insisted their
figures are distorted by the offloading of toxic loans made during the
But Chris Leslie, Labour’s Shadow Treasury minister, slammed the figure as ‘disappointing’.
Bank of England (building pictured) figures show a total of 4.36bn was borrowed between the launch of the Bank's Funding for Lending scheme on August 1 and the end of September
Around 54 companies every day are becoming insolvent, with many blaming the problems that they face getting money or the long wait before a bank finally says ‘yes’.
Small firms are the engine room of the British economy and employ the majority of the private sector workforce. If small firms cannot grow, they cannot hire staff.
It was in July 2010 that this newspaper launched its ‘Make the Banks Lend’ campaign aimed at highlighting the nightmare facing cash-strapped small firms.
Lord Oakeshott, a leading LibDem peer, said: ‘RBS never fails to disappoint. Taxpayers poured in 45billion but it is a zombie bank, shrinking instead of lending.’
RBS said net lending increased by 412million to businesses and households between July and September, but said the figure published by the Bank was distorted by the offloading of its toxic debts.