Mervyn’s multiplier

24 April 2013 By George Hay Follow @gfhay

The Bank of England’s reworked Funding for Lending Scheme may finally be aimed at the right target: credit-starved small firms. Yet if the companies don’t want to borrow, it still won’t work. And it looks too easy for FLS cash to leach out into less deserving sectors.

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The Bank of England has extended its Funding for Lending Scheme. It will now allow banks to access cheap funding until the end of January 2015, a year later than previously.
The volume of accessible FLS cash banks are entitled to will vary depending on when it is drawn. In the first period, between April and December 2013, the funding will equal the increase in net lending to UK resident households, large corporates and non-bank sources, plus ten times the net lending increase to small businesses.
In the second period, from January 2014 to January 2015, the multiple of cheap funding to small-firm lending will be five instead of ten times.

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