Further updates to the TFSME to reflect changes to HMT’s Bounce Back Loans Scheme (BBLS) - Market Notice...

The objectives of the TFSME are to:

• help reinforce the transmission of the reduction in Bank Rate to the real economy to ensure that businesses and households benefit from the MPC's actions;
• provide participants with a cost-effective source of funding to support additional lending to the real economy, providing insurance against adverse conditions in bank funding markets;
• incentivise banks to provide credit to businesses and households to bridge through a period of economic disruption; and
• provide additional incentives for banks to support lending to SMEs, which typically bear the brunt of contractions in the supply of credit during periods of heightened risk aversion and economic downturns.

Consistent with the objectives of the scheme, the Bank announced on 2 May 2020 that TFSME participants would be able to extend the term of some of their TFSME funding to align with the term of loans made through the BBLS, which was set up to enable businesses to access finance more quickly during the coronavirus outbreak.

The Bank is today announcing further measures to ensure TFSME funding can continue to support lending to SMEs through the BBLS.

In addition to the change announced in May, whereby banks will be able to extend the term of some TFSME funding from four to six years, the Bank will also in future allow TFSME participants to extend part of their borrowings again, out to a total term of up to ten years.

Participants will be able to extend the term of TFSME loans by up to a further four years at the point at which existing six year TFSME loans mature. The amount of TFSME funding that can be extended will be capped at the amount of BBLS lending on TFSME participants' balance sheets at that point in time.

TFSME documentation will be updated in due course to reflect this change and to provide further operational details. Other than as amended by this Market Notice, previous Market Notices related to the TFSME continue to apply.