The Bank of England, in conjunction with the Treasury, announced the first tranche of six month loans are due to go to tender under the Extended Collateral Term Repo (ECTR) Facility on 20 June.
But Hall said: “Whilst an injection of liquidity from the central bank would seem prudent at a time when the UK economic recovery is faltering and considerable concerns remain over the future of the Eurozone, any cheap funding available under this scheme is likely to be fully available only to the banking sector & selected larger building societies.”
While technically any financial institution with access to Bank of England Standing Facilities will be able to bid for funds, the scale and nature of much of the building society sector is likely to mean that either excess holdings of eligible collateral are not available or resources do not allow for institutions to be able to take full advantage of these operations.
Hall said that while ECTR is likely to have the impact of driving down borrowing costs for the larger banks and building societies "it remains to be seen if this will have a drip down effect to smaller institutions cost & availability of funding or simply widen the current existing differentials.
“We wait to see if the ‘funding for lending’ scheme is similarly difficult for smaller lenders to access, I fear it might be.
And he added: “Whilst this may result in funding to banks for an extended period at below market rates it remains unclear whether this will find its way into the real economy, we’ll wait for the detailed provisions to be made clearer. I trust that these schemes do not end up as supporting big business only rather than those who are focussed on supporting real people in the real economy.
