Lloyds Share News (LLOY)

Just 13.8bn pounds was drawn down from the Bank of England (BoE) Funding-for-Lending Scheme (FLS) last year, figured published Monday revealed. The research also showed that net lending to UK households and business by FLS participants fell by £2.4bn during the three month period, compared to a rise of £0.9bn the previous quarter. In the final quarter of 2012, 11 participants made total FLS drawdowns of £9.5bn, compared to compared to the £4.4bn in the previous quarter, the BoE said. The scheme, which has 39 participating groups, was set up to boost lending by enabling banks and building societies which increase their lending to borrow more money at a lower cost by reducing funding costs. The data revealed a continuation of the trend of broadly flat lending growth, but the BoE was keen to stress that the fourth quarter is a typically weak one for lendings, adding that the improvement in credit conditions is "expected to feed through to a gradual pick up in net lending over the course of 2013". In a statement the BoE said that funding costs have "fallen significantly" since the announcement of the scheme and there are indications of an improvement in credit conditions, with loan rates falling. "But it will take time for this to feed through to lending volumes, given the typical lags involved in the loan application, approval and drawdown process," it admitted. Barclays Research commented that the data indicated "something of a polarisation across participants, with some having increased net lending sharply and others engaged in sizable retrenchment"."The success (or otherwise) of the FLS will be gauged not with reference to the participants' lending behaviour but to overall lending to the target borrowers (ie. including lending to UK households and businesses by non-participants)," it said. "BoE data show that this also fell by £2.7bn in Q4 12, but jumped by £3.1bn in January, as a rise in lending to companies more than offset weak mortgage lending. The continued weakness of mortgage lending is likely to be a source of frustration at the BoE, and it will hope to see clear signs of improvement over the next few months. "However, the reality is that the FLS can only bolster the supply of credit: if households and businesses lack the confidence to borrow, the scheme will have limited traction."