Term Funding Scheme with additional incentives for SMEs

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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 - now closed to new applications - was designed to:

  1. 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.
  2. 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.
  3. Incentivise banks to provide credit to businesses and households to bridge through a period of economic disruption.
  4. 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 could borrow central bank reserves in exchange for Eligible Collateral during the TFSME Drawdown Period.

The TFSME Drawdown Period ended on 31 October 2021.

The price and quantity of funding available to banks during the TFSME depended on their lending to SMEs during the relevant period.

The TFMSE is also sometimes known as TFS2.

See also