It’s too early to call the FLS a flop, ok? | FT Alphaville

It’s too early to call the FLS a flop, ok?

The Bank of England has published the first data from its new-fangled Funding for Lending Scheme. At first blush, the numbers look pathetic: net lending grew a paltry £500m in the three months to end-September, while total drawdowns from the FLS amounted to £4.5bn, against a potential pot of £100bn.

But that would be us jumping to conclusions, prematurely. As the Bank says:

Funding costs have fallen since the announcement of the FLS, but it will take time for reduced funding costs to feed through to lending volumes, given the typical lags involved in the loan application, approval and drawdown process. It is therefore too early to use these data as a reliable indication of the impact of the FLS on lending volumes.

And just in case we didn’t get that, the Bank adds:

The FLS incentivises banks to boost their lending by reducing bank funding costs. This allows banks to reduce the price of new loans and increase their net lending. But it takes time for reduced funding costs to feed through to lending volumes, given the typical lags involved in the loan application, approval and drawdown process.

All of which echo’s the Bank’s Paul Fisher, back in September:

…we will publish the first set of drawdown data in December, although you will have seen that one bank has already announced that it has drawn £1bn and plans to draw more. That said, it will probably take some time for banks to review fully their lending plans, and it is likely that drawings from the FLS will be spread out over the full window to end-2013.

Whatever. The accompanying table is of interest. Note Santander’s determination to shrink…

Click to enlarge.

Related link:
Credit scheme doubts as lending slows – FT