Rabu, 20 Juni 2012

Lenders snap up £5bn in cheap loans amid Bank of England efforts to stimulate UK economy

Lenders snap up £5bn in cheap loans amid Bank of England efforts to stimulate UK economy

By James Salmon

PUBLISHED: 16:23 EST, 20 June 2012 | UPDATED: 16:23 EST, 20 June 2012

Britain's battered banks snapped up £5billion in cheap loans in the Bank of England’s latest drive to keep the banking sector afloat in the face of a eurozone meltdown.

Threadneedle Street held its first monthly auction under its £60billion a year Extended Collateral Term Repo scheme, which was announced by governor Sir Mervyn King during his annual Mansion House speech last week.

Banks hoovered up all £5billion on offer, taking advantage of the bargain-basement interest rate of 0.75 per cent â€" just 0.25 per cent above the base rate.

Cheap money: Banks have taken advantage of the bargain-basement interest rate of 0.75 per cent

Cheap money: Banks have taken advantage of the bargain-basement interest rate of 0.75 per cent

The boost for Britain’s lenders came as a monthly healthcheck from the Old Lady revealed that cash-strapped companies are feeling the squeeze.

It said: ‘Credit conditions had tightened, with a number of firms reporting that rates and fees had risen. And some businesses were being actively encouraged to pay off outstanding loans.’

The update added that the appetite of well-run companies to borrow ‘remained very low, with many firms still focused on paying down existing debt’.

The comments raise questions about the Bank’s ‘funding for lending’ stimulus which will offer banks £80billion a year if they pass this on in loans to businesses and households.

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