flat gdp growth and 3 years of declining credit growth to households and businesses in the uk ( chart 6 ). and despite this being a period in which the mpc re - launched quantitative easing, helping to bring down longer term yields on gilts to record lows. central banks should not normally have to intervene to provide banks with medium - term funding at reasonable spreads. but enough was enough! the fls will not address any of the underlying problems in the euro area or in the financial sector, but given that many of those problems are outside the uk ’ s direct control, it became necessary for us to do something innovative. bis central bankers ’ speeches i want to use this opportunity today to expound on some of the principles underlying the fls. it is a deceptively simple scheme and inevitably there will be some misunderstanding about what it is intended to achieve and how it works. 3 to begin, i wish to make clear that the fls has been designed to support the uk economy, not the banks. there were many features of the scheme for which we made different choices because of that over - riding objective – full, quarterly disclosure of usage, bank by bank, being the most obvious. let me summarise the key features of the fls for those who have not followed the details. we will reduce the funding costs for banks and building societies by providing them with relatively cheap liquidity. in practice by lending them treasury bills for up to four years in exchange for the widest possible range of collateral that the bank can accept – including pre - positioned portfolios of loans. those treasury bills can be used as liquid assets to support an expansion of lending or turned into cash if necessary. we will charge a fee of just 25 basis points per annum as long as a bank ’ s stock of lending does not contract over the period to end 2013. the firms will have that 18 months to draw down the bills. this is essentially a swap of highly liquid assets for illiquid ones and part of a wider programme where the bank has been extending the range of collateral that it can take in such operations. so portfolios of loans are now eligible collateral for the first time in our market - wide facilities. one of the benefits of this expansion is that our operations are now much more accessible to smaller banks and building societies that don ’ t have large portfolios of tradable securities. every firm that signs up to the fls will be able to borrow an amount equal to at least

stronger but not enough to reduce an elevated unemployment rate. and we have seen indications of a slowdown in china and other large emes. perhaps the most striking thing about this is the degree of co - movement in gdp growth rates across economies. in reaction to the deteriorating outlook, we have seen a stream of policy actions, mostly by central banks as many fiscal authorities have felt constrained by excessive debt, deficits or both ( at least in the western hemisphere ). last november, the ecb announced three - year term repos, in unlimited scale. and more recently details of their proposed outright monetary transactions ( omts ). in the united states there is to be more quantitative easing ( qe ), including open - ended purchases of rmbs. in japan, just last week we saw a large expansion of their asset purchase programme. in the united kingdom we have been undertaking extra qe since october 2011 and earlier this summer we activated for the first time our new contingent facility of six month repos against a broad range of collateral – what we call the extended collateral term repo facility or ectrs. that was intended to act as a backstop should the risks in europe deepen and crystallise. usage has declined sharply since the first two operations suggesting that the degree of stress is not that great at the moment. more recently the bank and hm treasury jointly launched the funding for lending scheme ( the fls ) – of which more later. the full list of policy actions is much, much longer of course. the length of that list reflects the seriousness of the economic situation and the constrained ability of fiscal authorities. in the world of central banking, unconventional policies are the new normal. at least for now. financial markets have not just been suffering from external shocks. a series of home - made disasters have also rocked the sector. the ubs “ rogue trader ”, the losses at jp morgan ’ s chief investment office, libor manipulation at barclays ( with others under investigation ) and the mis - selling of ppi. these scandals have not so far been institution - threatening, but coming on top of the financial and macroeconomic crisis to date, they have helped to suck confidence from the financial sector just when it might otherwise have been recovering. chart 3 shows a “ heat map ” of markets generated by colleagues in the financial stability area of the bank. this chart uses indicators such as issuance amounts and bid - ask spreads to monitor market conditions. red indicates a non - functioning