Lloyds is revealed as the largest participant in the Bank of England's funding for lending scheme, having drawn nearly half of all funds since the scheme began in 2012. 

Official figures show that Lloyds Banking Group is the most active user of the Bank of England’s (BoE) funding for lending scheme. The programme, which was launched in 2012, has so far provided banks with £69.46bn ($98.3bn) in cheap funding, with Lloyds receiving £32.1bn of these funds (see chart one). 

Chart 1 v2

The funding for lending scheme was introduced in 2012 to spur bank lending to retail customers and for mortgages. The second largest user of the programme was Barclays, which has drawn £12bn in funds. However, the bank did not participate in the extension of the programme after 2013 when BoE decided to narrow it down to stimulate lending to small business.

In 2014, the programme was not enough to lift small to medium-sized enterprise (SME) lending by participating banks; it contracted by £1.63bn (see chart two). A big reason for that decline was the decision by RBS to reduce its small business loan book – the bank shrunk loans to SMEs by £1.83bn that year. The total stock of loans to SMEs was dented further by two other lenders, Clydesdale and Nationwide Building Society, which jointly reduced their lending by £3.2bn.

At the same time, two other banks increased lending to SMEs. Throughout 2014, Lloyds increased its stock of SME loans by £1.23bn and Santander grew its small business loan book by £508m. This growth continued into 2015, as Lloyds further increased its stock of SME loans by £1.46bn. However, loan growth at Santander slowed down – the bank increased its small business loan book by only £155m.

Lloyds made use of the BoE’s funding scheme throughout both 2014 and 2015, having drawn £22.1bn throughout that time. This was not the case with Santander, which used the scheme only in 2014, having drawn £2.18bn in funds.

In 2015, the shedding of SME loans slowed down at RBS and Nationwide Building Society while Clydesdale Bank opted out of the scheme in February 2015. Combined with expansion by Lloyds, this was enough to return SME loans to growth in 2015. For the participating banks, every quarter of the year saw SME growth, with a slowdown at the end of the year – in the fourth quarter, the increase was £599m as opposed to £755m in the third.

Chart 2 v2

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