HBOS Taps 250 Million Pounds of EIB Funds for Loans
December 19, 2008
HBOS Plc, the U.K. bank being bought by Lloyds TSB Group Plc, plans to use 250 million pounds ($372 million) of European funds to offer discounted loans to small and medium-sized businesses in the U.K.
HBOS is finalizing a deal with the European Investment Bank to secure the funds, which will enable it to offer loans with a discount of as much as 80 basis points below “standard rates,” the Edinburgh-based company said today in a statement. It will also guarantee pricing and availability on overdrafts to small businesses for 12 months from the date of arrangement.
HBOS follows Barclays Plc, the U.K.’s third-biggest bank, which said last month it will use 150 million pounds of EIB funds to offer discount loans to smaller businesses. U.K. banks are under pressure from the government to maintain lending to small businesses and home owners to relieve the economic slowdown.
The EIB, a Luxembourg-based lender backed by European Union governments, agreed in October to provide the U.K. with 4 billion pounds of funds for small businesses struggling to access cash.
Government-owned Royal Bank of Scotland Group Plc is also in discussions to access the funds in order to provide discount rates, spokeswoman Carolyn McAdam said today. RBS said Nov. 23 that it will guarantee small companies’ overdrafts through 2009.
London-based Lloyds TSB will pass on interest-rate reductions to small business customers until the end of next year and will also guarantee the price and availability of overdrafts for the length of customers’ contracts, it said in a statement earlier today.
Discount Rates
Barclays is offering small-business loans with discounts of as much as 100 basis points below its standard terms.
Edinburgh-based RBS, Lloyds TSB and HBOS are using 37 billion pounds under the U.K.’s bailout plan to replenish capital in a deal that restricts dividend payments, executive bonuses and requires commitments on lending. London-based Barclays, which shunned the government plan, is raising almost 7 billion pounds, largely from Middle Eastern funds.
HBOS’s discounted loans will be offered to companies with fewer than 250 employees and revenue of less than 1 million pounds.
Source:http://www.bloomberg.com/apps/news