FT Alphaville " A scarred market and a Funding for Lending update To summarise my assessment of markets at this point I would no longer say that they are healing. Rather, markets are scarring over - adapting and evolving to the new environment. That's from the BoE's Paul Fisher's speech to Richmond University. It's worth a read. He runs through changing market conditions, the search for safe assets, the OMT and the limitations of a central banks" powers and, significantly, a Funding for Lending update... which forced him into a conversation with himself (the opening questions in that solo-debate are below): Together [the first banks and building societies to have signed up] account for around 73% of the stock of lending to UK households and corporates. I should also note that a significant number of other institutions are close to signing up too and we will update this table in due course. In addition, we will publish the first set of drawdown data in December, although you will have seen that one bank has already announced that it has drawn £1bn and plans to draw more. That said, it will probably take some time for banks to review fully their lending plans, and it is likely that drawings from the FLS will be spread out over the full window to end-2013. You might reasonably ask some questions: Why have we set this minimum access amount and complicated pivot in the price? How can we be sure that any increase in credit flows to where it may be most needed? In particular to SME businesses and to first-time home buyers. What if there just isn't sufficient demand for credit? Won't the banks just pocket the benefits of the cheap funding? Indeed those are some of the questions I am most often asked and where I want to put some answers on the record today. The first point I want to make in reply is that banking in the UK is far from a perfectly competitive market. The six biggest lenders account for the vast majority of lending to UK businesses and households - and the seventh largest accounts for less than a third as much as number six. In large part the quantitative success of the scheme will depend on what these larger lenders do.... Related link: Team BoE pins hopes on lending scheme - FT Alphaville This entry was posted by David Keohane on Tuesday, September 25th, 2012 at 11:19 and is filed under Uncategorised. Tagged with boe, Funding for lending, paul fisher.