Funding for lending and ongoing loan forbearance

Lest anyone forget that there is an unknown quantity of bad loans hidden on bank balance sheets, the Bank of England's report on how the Funding for Lending program is going reminds us.

As reported by the Guardian,

It does appear to be having an impact for customers looking for a mortgage. The Bank of England's closely-watched agents' report says: "Recent reductions in institutions' marginal funding costs appeared to be working through more quickly in the residential mortgage market than corporate lending." 

But the picture still looks for bleak for small businesses. "Some business lenders appeared still to be tightening terms," the agents said. Overdrafts were being restricted and banks demanding "additional personal guarantees" for credit. 

Not exactly what the government intended. 

And even in those instances where lenders are starting to offer loans at lower rates, the demand from small business to borrow money is low. 

The agents' report says that lenders are continuing to show a "significant degree of forbearance" to help businesses in financial difficulty. Helpful for businesses, but not reassuring for anyone worried about the potential bad loans being stored up on banks' balance sheets.