HSBC (>> HSBC Holdings plc), Lloyds Banking Group (>> Lloyds Banking Group PLC), Barclays (>> Barclays PLC), Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) and Santander UK started to review hundreds of savings and mortgage products on Thursday, but only two committed to immediately passing on the BoE rate cut, to customers borrowing at standard variable rates.

By 1529 GMT Barclays and Santander UK, the British arm of Banco Santander (>> Banco Santander, S.A.), had already decided to pass on the savings, while rivals HSBC, Lloyds and RBS, told Reuters they would evaluate deposit and lending rates offered and inform affected customers of any changes in due course.

Any decision not to pass on the cut, made as part of the BoE's efforts to restore consumer confidence and boost spending following the vote to leave the European Union, would put lenders on a direct collision course with policymakers.

"The banks have no excuse, with today's announcement, not to pass on the cut in Bank Rate and they should write to their customers and make that point," BoE Governor Mark Carney told a news conference.

Shares in HSBC, RBS and Barclays were trading up at 1529 GMT, as investors took a sanguine view of the cut and the extra pressures it could put on the profitability of UK banks, which have seen lending margins slashed in recent years.

Shares in Lloyds were trading down 1.7 percent.

In recognition of the likely strain a fresh rate cut would put on lenders, the BoE's Monetary Policy Committee (MPC) said it would launch the Term Funding Scheme (TFS) to provide four-year funding for banks at interest rates close to the Bank Rate.

Under the terms of the scheme, banks can initially borrow up to 5 percent of their outstanding lending to UK businesses and households and will be able to access the lowest cost of funding if they maintain or expand net lending to the real economy.

In addition to their initial allowance, they can obtain another pound of funding for every pound their net lending expands between end-June 2016 and end-December 2017.

But if their lending shrinks, they will face a higher fee and receive no additional allowance. For each 1 percent that net lending falls, the cost of TFS funding will rise by 0.05 percentage points to a maximum of 0.25 percentage points over Bank Rate.

Banks' current all-in funding costs in wholesale markets or deposit rates are currently at least 1.0 percentage points on average.

This isn't the first time the BoE has launched a scheme aimed at stimulating the economy by providing cheap money to banks. Four years ago it launched a similar initiative called Funding for Lending, which has provided around 60 billion pounds of cheap funding for UK banks and building societies.

But unlike Funding for Lending, the TFS will be funded by money newly created by the Bank of England, and as such, is a form of quantitative easing.

"This is a far more important BoE decision than it first appears. Carney has very cleverly made some conventional headline changes, while disguising a potentially radical new tool. No one can now say the BoE is out of ammunition," Eric Lonergan, macro investment fund manager at M&G Investments said.

BENEFICIARIES

Analysts said the TFS suited lenders with higher loan-to-deposit ratios more than those who typically funded a greater proportion of their lending with retail deposits.

"We think 'past behaviour' offers a very good guide to potential bank attitudes to utilisation of the new Term Funding Scheme. Lloyds has drawn 38.1 billion pounds under the Funding for Lending Scheme and, put simply, we think it has greater flexibility than its more liquid peers to benefit from the TFS," Investec's Ian Gordon said in a note.

However, some industry commentators said they were not convinced Carney's stimulus measures would help keep credit flowing.

"Today's decision will test the limits of monetary policy which many would argue ran out of runway some time ago. But then again we live in economically perverse times," Bill Michael, global head of financial services at KPMG said.

"In any case, and whatever your beliefs, there is one inescapable fact - it runs the risk of placing a fragile financial system under further strain as it will have an adverse impact on banks’ ability to make money and impact their appetite to lend."

Speaking after the bank's half-year results last week, Lloyds Chief Executive Antonio Horta-Osório told reporters he believed that any additional monetary measures would "have a very marginal impact" because interest rates were already very close to zero.

Banking industry lobbying group the BBA said Thursday's rate cut and stimulus measures marked the Bank of England's 'whatever it takes' moment for coming to the aid of a UK economy rattled by post-Brexit recession fears.

"The decision to cut interest rates and increase quantitative easing sends a clear signal that the Bank of England is taking a 'whatever it takes' approach to stabilising the economy," Rebecca Harding, BBA's chief economist said.

"Weak post-Brexit data is creating a perception that the economy is likely to slow and the decision to reduce rates has been made on the basis of a perception of risk."

At the height of the euro zone sovereign debt crisis in 2012 European Central Bank President Mario Draghi famously pledged to do "whatever it takes" to save the euro.

(Additional reporting by Huw Jones; Editing by Susan Fenton, Greg Mahlich)

By Sinead Cruise and Andrew MacAskill