Term Funding Scheme with additional incentives for SMEs
UK - Bank of England - interest rates.
The Bank of England's Monetary Policy Committee (MPC) reduced the UK's Official Bank Rate to 0.1% on 19 March 2020, in response to COVID-19.
The Bank of England’s TFSME is designed to:
- Help reinforce the transmission of the reduction in Bank Rate to the real economy to ensure that businesses and households benefit from the MPC’s actions.
- Provide participants with a cost-effective source of funding to support additional lending to the real economy, providing insurance against adverse conditions in bank funding markets.
- Incentivise banks to provide credit to businesses and households to bridge through a period of economic disruption.
- Provide additional incentives for banks to support lending to SMEs that typically bear the brunt of contractions in the supply of credit during periods of heightened risk aversion and economic downturns.
Under the terms of a TFSME Advance, participating banks can borrow central bank reserves in exchange for Eligible Collateral during the TFSME Drawdown Period.
The TFSME Drawdown Period will be open no later than 27 April 2020, and will run until 30 April 2021.
The price and quantity of funding available to banks during the TFSME depends on their lending to SMEs from 31 December 2019 to 31 December 2020.
The TFMSE is also sometimes known as TFS2.