The Bank of England revealed details of its scheme to boost lending to first-time buyers and small companies yesterday in a move that ministers hope will inject £80 billion into the ailing UK economy.
The “funding for lending” scheme, which will take effect next month, was welcomed by the chancellor, George Osborne, who said the launch of the emergency facility showed Britain was “not powerless to act” in the face of the euro zone crisis.
The Bank of England said cheap loans to banks and building societies by the central bank would offset the effects of higher costs faced by financial institutions in wholesale money markets.
Business groups said that they hoped the scheme would prove more effective than Project Merlin. This was last year’s deal that married targets for bank lending with some moves towards more transparency on bankers’ pay.
Sir Mervyn King, the governor of the Bank of England, said action by the central bank and the Treasury “will encourage banks to make loans to families and businesses both cheaper and more easily available”.
The Bank of England said it would charge a fee for accessing the facility, but this could be as much as one or two percentage points below the cost of raising funds from other sources. – (Copyright: Guardian News and Media 2012)
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