Pick-up in UK lending under Bank of England credit plan

Lending through the Bank of England’s flagship credit programme rose in the second quarter, led by Lloyds Banking Group and Nationwide Building Society, with banks expecting further expansion through the rest of 2013.

Lending rose £1.6bn (€1.88bn) in the second quarter from the first three months of the year, the central bank said in a report on use of the Funding for Lending Scheme (FLS) yesterday.

Nationwide and Lloyds lent a combined £3.5bn, while Royal Bank of Scotland and Banco Santander UK unit paced declines.

“FLS participants collectively expect net lending volumes to pick up over the remainder of this year,” while indicators suggest “credit conditions are steadily improving for households and firms,” Bank of England markets director Paul Fisher said.

While the figures showed an increase for lending to individuals, they showed a decline for lending to SMEs.

Banks and policymakers have come under criticism for failing to extend a lending recovery from mortgages to smaller firms.

Bank of England governor Mark Carney said last week that he would relax liquidity rules for some banks to stimulate loan growth and aid the recovery.

Lending is still down £2.3bn from a year earlier, before stiffer capital demands that banks blamed for restricting their ability to extend credit.

Total lending fell £2.8bn at government-owned RBS in the quarter, and dropped £1.8bn at Santander UK.

Some 18 participant banks drew down a net £2bn from the FLS, while aggregate outstanding drawings were £17.6bn.

Bank of England data for July show lending to large companies rose by £1.4bn, and shrank by £894m for SMEs.

From a year earlier, lending is down 3.2% for SMEs and down 3.4% for bigger companies.

Lending to individuals picked up in the quarter, though it shrank for businesses, according to the report, as large companies tap the capital markets if they can.