12,13 In July, the Bank of England and the British Treasury announced the details of the "financing-for-loan" plan determined in June 20 12. At the same time, the Bank of England announced that the "financing-for-loan" program will be officially launched on August 12, and the central bank is open to accepting collateral.
The plan aims to help families and businesses get low-interest loans more easily as a new policy to push the economy out of recession. According to the plan, the central bank will provide cheap financing for British banks if they can lend the funds they have obtained to cash-strapped enterprises and property buyers.
Mervyn Mervyn King, governor of the Bank of England, said: "The more loans banks lend to the outside world, the more cheap money they can get from the financing-for-loan program. This will encourage banks to lend to families and businesses at lower interest rates and in a more convenient way. "
The Bank of England announced that under this plan, banks can use a variety of collateral, including household and corporate loans, to exchange short-term treasury bills or deduct handling fees. These short-term treasury bills are extremely safe and easy to sell, which means that banks can obtain market financing at a very low cost.
According to the plan, participating in the "financing for loans" plan requires a handling fee, which depends on the scale of the bank's foreign loans. Banks that maintain or expand the loan scale only need to pay a handling fee of 0.25% of the total borrowed assets to the central bank; Banks that reduce the loan scale have the highest handling fee of 1.5%.
The plan also stipulates that banks can exchange up to 5% of national debt from the central bank. According to the Bank of England, this ratio means that about 80 billion pounds of loans will flow into the economy in the future.
On April 24th, 20 13, the Bank of England and the Ministry of Finance indicated that they would extend the FLS term by one year to 20 15 and 1, and open it to financial leasing institutions and other institutions that lend to SMEs.
Jin En said that extending the loan-for-financing program (FLS) is a supplement to strengthening the capital requirements of banks, not a substitute.
King wrote to George Osborne, the British Chancellor of the Exchequer, saying that the adjustment of FLS will help maintain a benign financing environment for the banking industry and support economic recovery; But this can't replace the requirement of British banks to maintain sufficient capital. He said that banks with insufficient capital cannot increase lending.
During the financial crisis, many big banks in Britain issued long-term bonds, a large part of which will expire before the end of 20 14 1. These bonds are often credit bonds, which makes the financing cost of banks higher. The cost of using FLS funds (repurchase loan interest rate+borrowing British government bonds) is much lower than the interest rate of credit bonds. This makes the British banking industry subjectively motivated to use FLS funds to replace due credit loans, thus reducing financing costs. Moreover, the FLS plan does not restrict the use of loans borrowed from British government bonds, and objectively facilitates the "exchange of civet cats for princes" in the British banking industry.
It can be predicted that the British banking industry may use its FLS line to provide financing for debts due, thus reducing the financing cost. In this case, FLS will become a "free gift" provided by the Bank of England to the British banking industry, rather than expanding the scale of credit. FLS may eventually be used to reduce the interest expenses of British banks and improve their profits. However, since the British government is the majority shareholder of some banks (Lloyds Bank and Royal Bank of Scotland), the ultimate beneficiary of the FLS scheme may be British taxpayers.