Britain launches 'funding for lending' initiative

Britain's government on Friday launched an £80-billion ($123.7 billion, 102 billion euros) initiative to provide the banking sector with cheap funding to stimulate lending and boost growth. The Treasury said in a statement that its "funding for lending" programme, which was unveiled last month, would lift lending to households and businesses and ward off a tightening credit squeeze amid the ongoing eurozone debt crisis. "Today's announcement aims to make mortgages and loans cheaper and more easily available, providing welcome support to businesses that want to expand and families aspiring to own their home," said finance minister George Osborne. He added the move would "inject new confidence into our financial system and support the flow of credit to where it is needed in the real economy -- showing that we are not powerless to act in the face of the eurozone debt storm". Under the scheme, banks and building societies are allowed to borrow from the Bank of England for up to four years. As security, they will have to provide assets like business or mortgage loans. Banks will be eligible to borrow during the 18 months from 1 August 2012 until 31 January 2014. The Treasury added that, if banks take funds equivalent to five percent of their current stock of loans, an extra £80 billion of credit will flow into the British economy. The scheme aims to free up the log jam in credit hitting the economy, by offering banks cheap finance on the condition they pass it on to borrowers. It is hoped that this will help clear the blockage in credit lines which has hampered the country's recovery from the 2008 global financial crisis.