25 March 2005
Financially strong NHS foundation trusts will be able to borrow up to 40% of the value of their assets under a new borrowing regime published by their regulator this week.
When foundations were launched last April, many of the first wave were annoyed that their borrowing limit was set to 10% of their assets for the first year while the regulator, Monitor, developed and consulted on its prudential borrowing code.
Monitor will place each foundation trust in one of five risk categories each year based on their financial status, allowing them to borrow nothing or up to 10%, 15%, 25% or 40% of their total assets.
The ratio is one of five that must not be breached under the code. Others ensure trusts are not over-stretched — for example one ensures repayments are less than 3% of revenue.
Money can be borrowed from the public sector or commercial markets and Monitor believes most foundations will fall into categories three and four (able to arrange long-term loans of 25% and 40% of assets).