1. An extension to the FLS was announced on 24 April 2013, and amended on 28 November 2013 and on 2 December 2014. Further changes were made to the terms of the FLS Extension on 30 November 2015. This Consolidated Market Notice describes the operation of the FLS Extension following those changes and replaces the Consolidated Market Notice dated 2 December 2014. Further information on the FLS, including all the relevant documentation, can be found on the Bank’s website.
2. Eligible institutions not signed up to the FLS Extension can apply to join the Scheme, and will be required to sign an Extension Letter to become an FLS Extension Participant.
3. Participants who were signed up to the Scheme at 2 December 2014 (when the Extended Drawdown Period was extended to end January 2016) could opt to leave the Scheme at 30 January 2015 by informing the Bank of their intention to do so prior to this date. Participants who have opted out of the Scheme are not able to draw from the FLS Extension after 30 January 2015.
4. Eligibility and continued access to the FLS will be dependent upon a Participant and other members of its FLS Group acting, in the opinion of the Bank, in good faith and in a manner consistent with the objectives of the FLS.
Drawdowns
5. The “Extended Drawdown Period” will run from 3 February 2014 to 31 January 2018.
FLS Group
6. For the FLS Extension, a Participant’s FLS Group is defined as all Monetary Financial Institutions (Monetary Financial Institutions means the subsector defined in paragraph 2.48 of Annex A to Council Regulation (EC) No. 2223/96, known as ESA95) and Specialist Mortgage Lenders within a Group (as defined in the SMF - see the Glossary of the SMF Terms and Conditions), as well as Non-Bank Credit Providers (“NBCPs”) which are part of the Participant’s broader group, as determined by the Bank. NBCPs are defined as “financial leasing corporations”, “factoring corporations” and “mortgage and housing credit corporations (excluding SPVs related to securitisation)”, as defined in the statistical definitions of Form AL (see definitions for 15A, 15D and 15E within Parts IV.1 and IV.2 of the Classification of Accounts Guide).
7. New applicants to the FLS Extension may apply to have their FLS Group designated a “New Group”. Banks eligible for this part of the Scheme will be those that have been authorised or had a significant change in control since 1 April 2013, and whose prospective FLS Group had a stock of sterling lending to UK households, Private Non-Financial Corporations (PNFCs) and Non-Bank Credit Providers (NBCPs) of no more than £50mn as at end-2015. This designation will be granted at the Bank’s discretion.
Borrowing Allowance
8. The quantity of funding available during the Extended Drawdown Period will be based on the quantity of sterling loans made by a Participant’s FLS Group.
9. All participants will need to provide lending data disaggregated into Small and Medium Sized Enterprises (“SMEs”) and “Large Corporates”. SMEs are defined here as both PNFCs with an annual debit turnover of less than £25 million on the business account and Unincorporated Businesses (“UBs”). UBs are defined as unincorporated businesses resident in the UK (e.g. sole traders). “Large Corporates” are defined as PNFCs with an annual debit turnover of greater than or equal to £25 million on the business account. For lending to UK resident households, the amount of this which is to UBs will need to be disaggregated. Lending to UBs should not include buy to let lending.
10. During the Extended Drawdown Period, Participants in an FLS Group (with the exception of New Groups) may draw up to:
- The “Extended Borrowing Allowance” for the period 1 February 2014 to 31 July 2016. The Extended Borrowing Allowance is equal to the “Initial Allowance” plus the “Additional Allowance” plus the “Further Allowance”; and
- The “Scaled Borrowing Allowance” for the period 1 August 2016 to 31 January 2018, providing the Scaled Borrowing Allowance is greater than total drawdowns made during the Extended Drawdown Period.
The Scaled Borrowing Allowance is equal to a percentage of the Extended Borrowing Allowance: 75% for the period 1 August 2016 to 31 January 2017; 50% for the period 1 February 2017 to 31 July 2017; and 25% for the period 1 August 2017 to 31 January 2018. If an FLS Group’s Scaled Borrowing Allowance drops below the aggregate drawdowns made by Participants in the Group, no further drawdowns can be made.
11. The Initial Allowance is determined by net lending (i.e. new applicable loans net of repayments) over the period 1 April 2013 to 31 December 2013 as a whole. The Initial Allowance will be equal to the sum of net lending over this period to UK resident households (excluding UBs), Large Corporates and NBCPs that are not part of the FLS Group, plus ten times net lending to SMEs. If this weighted sum is negative, the Initial Allowance is zero.
12. The Additional Allowance is determined by net lending during the period 1 January 2014 to 31 December 2014. The Additional Allowance will be equal to the sum of net lending from 1 January 2014 to 31 December 2014 to UK resident Large Corporates and certain NBCPs (including financial leasing corporations and factoring corporations but excluding mortgage and housing credit corporations) that are not part of the FLS Group, plus five times net lending to SMEs. If this weighted sum is negative, the Additional Allowance is zero.
13. The Further Allowance is determined by net lending during the period 1 January 2015 to 31 December 2015. The Further Allowance will be equal to the sum of net lending over this period to certain NBCPs (including financial leasing corporations and factoring corporations but excluding mortgage and housing credit corporations) that are not part of the FLS Group plus five times net lending to UK resident SMEs. If this weighted sum is negative, the Further Allowance is zero.
14. Lending data for the FLS Extension will be reported on Form FLC for 2013 Q2-Q4, on Form FLD for 2014 Q1-Q4 and on Form FLE for 2015 Q1-Q4. These data must be submitted quarterly, based on calendar quarters.
Participation for New Groups
15. Participants in a New Group may draw in aggregate up to the “New Group Borrowing Allowance” for the FLS Group. The New Group Borrowing Allowance is determined by net lending during the period 1 January 2016 to 31 December 2017. The New Group Borrowing Allowance will be equal to the sum of net lending over this period to UK resident households (excluding Unincorporated Businesses), Large Corporates and Non-Bank Credit Providers that are not part of the FLS Group (including financial leasing corporations and factoring corporations but excluding mortgage and housing credit corporations as defined in the statistical definitions of Form AL) plus five times net lending to UK resident SMEs. If this weighted sum is negative, the New Group Borrowing Allowance is zero. Lending data for this period will be reported on Form FLC9, which must be submitted quarterly, based on calendar quarters. New Groups will not be required to report Form FLD or Form FLE.
Audit requirements
16. The Bank reserves the right to require independent audits of the data provided to the Bank at any time. Participants will be required to provide an independent audit report on the accuracy of the data provided to the Bank for the FLS Extension and will confirm specific details of requirements in due course.
Fee for drawings made in the Extended Drawdown Period.
17. The fee will be calculated daily based on the market value of the Treasury bills drawn by Participants in an FLS Group during the Extended Drawdown Period. The fee will be allocated between Participants in an FLS Group in proportion to the Participants’ drawings.
18. Participants will pay a flat fee of 25bp per annum each calendar quarter in arrears on all drawings up to the Extended Borrowing Allowance, the Scaled Borrowing Allowance, or the New Groups Borrowing Allowance (where applicable) made during the Extended Drawdown Period.
Published information
19. The Bank will publish the following information for each FLS Group participating in the FLS Extension not designated a New Group:
- the Initial Allowance, and the sectoral breakdown described in paragraph 9 of lending over the period 1 April 2013 to 31 December 2013 on which it is based;
- the stock of loans as at 31 December 2013;
- net lending figures for 2014 and 2015, including the relevant sectoral breakdown; and
- outstanding drawings from the Extended Drawdown Period.
20. The Bank will publish the following information for each New Group participating in the FLS Extension:
- the stock of loans at 31 December 2015, including the relevant sectoral breakdown;
- net lending figures for 2016 and 2017, including the relevant sectoral breakdown; and
- outstanding drawings from the Extended Drawdown Period.
21. Lending and drawings data will be published quarterly with a lag, on a pre-announced timetable.