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24 Apr 2013
Forex Flash: FLS extension is no game changer - Nomura
FXstreet.com (Barcelona) - Nomura economist Philip Rush believes that the UK´s FLS extension is no game changer.
He begins by noting that the Funding for Lending Scheme has been extended by a year and to include non-bank credit providers in the allowance. Loans to SMEs are slightly encouraged by assigning a higher weight to them for the FLS allowance. He feels that without changes to the binding capital requirements, this does nothing to affect deleveraging pressure Therefore he sees the incentive to lend to SMEs coming at the expense of households, and even that is possibly offset elsewhere. He writes, “Although we see the effect on the real economy as marginal, we believe such CE lessens the probability of QE.”
He begins by noting that the Funding for Lending Scheme has been extended by a year and to include non-bank credit providers in the allowance. Loans to SMEs are slightly encouraged by assigning a higher weight to them for the FLS allowance. He feels that without changes to the binding capital requirements, this does nothing to affect deleveraging pressure Therefore he sees the incentive to lend to SMEs coming at the expense of households, and even that is possibly offset elsewhere. He writes, “Although we see the effect on the real economy as marginal, we believe such CE lessens the probability of QE.”