Banks 'abusing Funding for Lending Scheme'

16 January 2013

British banks may be abusing a government initiative designed to improve the flow of capital to businesses and consumers, a Bank of England (BoE) official has indicated.

Andrew Bailey, a senior policymaker at the central institution, believes that financiers are managing to "rip off" people looking for affordable credit by cutting savings interest rates but keeping borrowing costs high, despite the presence of the Funding for Lending Scheme (FLS).

Last summer, the administration launched the FLS - an £80 billion ($128 billion) programme that permits financiers to borrow from the BoE at attractive interest rates on the premise they pass these savings on to customers.

However, while speaking at the Treasury Select Committee, Mr Bailey commented: "The jury is still out on whether we have seen as much adjustment there as you would expect to see and ought to see."

Meanwhile, Sylvia Waycot, a financial expert at Moneyfacts, told the Daily Telegraph that savers are being "persecuted without borrowers getting the rewards".

By Claire Archer

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development