LONDON (Reuters) - The Bank of England unexpectedly cut interest rates by half a percent on Wednesday and launched a new funding scheme for businesses in a shock move to bolster the economy against disruption from coronavirus.
Below are five facts about the new scheme:
- The Money Policy Committee voted unanimously at a meeting on Tuesday for the Bank of England to introduce a new Term Funding scheme with additional incentives for Small and Medium-sized Enterprises (TFSME), financed by the issuance of central bank reserves.
- The scheme will, over the next 12 months, enable banks and building societies to access Bank of England funds equivalent to 5% of their lending to the real economy at an interest rate very close to the BoE's 0.25% bank rate.
- Additional funding will be available for banks that increase lending, especially to small and medium-sized enterprises (SMEs).
- Experience from the Term Funding Scheme launched in 2016 suggests that the TFSME could provide in excess of 100 billion pounds ($129 billion) in term funding.
- The scheme is designed to reinforce the transmission of the cut in Bank Rate to the real economy and incentivise banks to provide credit to businesses and households to bridge through a period of economic disruption.
($1 = 0.7768 pounds)
(Reporting by Kate Holton; editing by Guy Faulconbridge)