The Funding for Lending Scheme (FLS) has opened for the next eighteen months.
Starting today, banks and building societies can borrow in the FLS at cheaper rates, for periods of up to four years, in a scheme designed to encourage greater lending to UK households and businesses.
The Scheme delivers credit easing to the whole economy, and has strong incentives for banks and building societies to increase lending to UK households and businesses: those that lend more, can borrow more in the FLS, and can do so at lower cost than those that scale back lending.
The FLS is designed to encourage broad participation so that as many institutions as possible have incentives to lend more to the UK real economy than they otherwise would have.
It is expected that banks currently offering loans through the National Loan Guarantee Scheme (NLGS) will, over time, cease to offer NLGS branded products and instead opt to deliver credit easing through the FLS.
George Osborne, Chancellor of the Exchequer, said:
"The NLGS has made a real difference, with over 16,000 cheaper loans worth over £2.5bn already offered to businesses across the UK. In many cases, the money saved has meant an extra person employed who otherwise still might be looking for work.
"The more generous FLS has officially opened for business and will in time effectively take over from the NLGS, delivering credit easing to the whole economy."