So far banks have used the Funding for Lending scheme to take up £4.4bn in cheap funding from the Bank of England since August. The total net lending of banks rose by £496m too.
The (FLS) was created to encourage more lending to businesses and although it appears to be working, the Bank said that it may take time for the funding to flow through to the economy.
"I am confident that the FLS will help the supply of credit. The incentives in the scheme are for banks and building societies to cut lending rates and hence lend more to get the cheapest funding," said Paul Fisher, executive director for markets at the Bank of England.
But John Walker, national chairman of the Federation of Small Businesses, still feels more needs to be done. "What is needed is more competition and choice for small businesses to access finance," he said. "Our data tells us that around four in 10 small firms were refused loans in the third quarter."
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