BOE urged to give alternative lenders more financial help
FINANCE chiefs are scrambling to break a deadlock that has blocked cheap Bank of England funds from flowing to struggling fintech companies, mortgage providers and alternative lenders.
Banking groups led by the Finance & Leasing Association yesterday proposed a “Term Funding Pipeline” to rescue non-bank lenders that provide huge amounts of credit to consumers and small businesses.
It comes amid growing fears that many non-bank lenders could collapse as rescue talks stall.
Discussions in recent weeks have centred around giving riskier alternative lenders access to the Bank’s Term Funding Scheme (TFS), a programme that provides established banks with cheap cash from Threadneedle Street and is a crucial crutch in times of crisis.
However, hesitant officials are understood to be looking for an alternative, indirect route they can follow to pump money into the struggling firms.
Non-bank lenders provided £140bn of new credit to UK businesses and households in 2019, and were behind a third of new consumer loans. Many lend online and have become crucial to the economy since the financial crisis.
The TFS provides funding at close to the Bank of England’s base interest rate but only helps banks overseen by its Prudential Regulation Authority (PRA).
Simon Goldie, head of asset finance at the Finance & Leasing Association, said: “Only Pra-regulated banks have access to term funding but because that funding is not flowing through to non-bank lenders in the wider economy, it’s creating a funding vacuum that will affect a huge swathe of SMES and consumers.”
The Bank of England declined to comment.