NLGS to be phased out in favour of FFL

The Government's flagship National Loan Guarantee Scheme has been sidelined in favour of the new 80bn Funding for Lending (FFL) initiative, just five months after it launched.

The Treasury has confirmed that the credit-easing initiative is likely to be phased out by participating lenders, including Barclays, Santander, Bank of Scotland, Natwest and Ulster Bank, in favour of the FFL scheme, which it says is more generous with stronger incentives to encourage banks to increase their lending.

Santander and RBS have already confirmed that they will no longer be offering loans under the NLGS initiative while a Barclays spokesperson said the bank was on the verge of completing its £1.5bn NLGS funding allocation and would in future be offering products under the Funding for Lending scheme.

FFL is a Treasury and Bank of England scheme, launched at the beginning of August, which makes loans available to banks at low interest rates on the condition that they pass the credit on to businesses and households in the form of loans and mortgages.

A key difference between the two schemes is that under the FFL initiative banks are not obliged to pass on lower interest rates, while under the NLGS firms could benefit from a 1% discount on the interest rate charged.