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BUDGET 2010: Govt to force state-backed banks to lend £94bn

Chancellor Alistair Darling has set Royal Bank of Scotland and Lloyds a target of £94bn of new lending for the coming year.

In today’s Budget speech, Darling said that between them RBS and Lloyds lent £38bn to small and medium businesses last year but the Government wants this to increase significantly.

The Government has set a target of £94bn of new lending for the state-owned banks, with half of this being lent to small businesses.

Darling also pledged to speed up the licensing of new banks looking to come to market.

RBS Group chariman Philip Hampton says: “We have the capital to make this lending available to support our customers. The right amount of debt for business will be greatly influenced by the pace of economic recovery.  We are committed to ensuring our credit worthy personal and business customers can access the funding they require.”

RBS says the agreement includes £8bn of net lending available for mortgage customers.

Lloyds has agreed with the Government to lend £44bn in total gross new business lending and £23bn in total gross new mortgage lending, excluding remortgages, which is includes the extra £3bn agreed under its lending agreement with the Government. The bank expects to lend £67bn, excluding remortgages, to UK businesses and homeowners over the next 12 months.

Between March 2009 and February 2010, Lloyds’ total gross mortgage lending, including its lending commitment, was £35bn.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. All a load of poppycock. They should have forced £94 billion of NET lending, never mind gross lending. We’re all doomed Captain Mainwairing, doomed I say

  2. The problem isn’t that these banks aren’t offering loans to businesses. The problem is that the terms on which those loans are being offered are so punitive that businesses are having to turn them down.

    So when the government inspector or whoever comes along and asks why the bank isn’t meeting its lending targets, the bank shows it a list of all the loans that it’s offered and says they’re doing their best but businesses aren’t taking up what’s being offered. Not our fault, guv.

    The only way that banks are going to lend more to businesses is if government directly intervenes in the process of underwriting and formulating terms for each offer. And how many civil servants have any experience of or expertise in that? Precious few, I’ll warrant, because civil servants have everything paid for by the tax payer. They’ve no idea about business lending and borrowing. If the government tried to intervene in the process there’d rapidly be chaos. The banks don’t want to lend and civil servants don’t have the knowledge to get them to do so on terms that are both acceptable to borrowers whilst at the same time being commercially viable for the lender.

    A load of waffle from Alistair Darling about getting banks to lend more isn’t going to solve anything. It’s just politician’s bullshit.

  3. Thinking about it, banks offering loans on unreasonable terms may well be an issue of (not) TCF. This surely means that such “behaviours” leading to unsatisfactory “outcomes”, namely that the business in question doesn’t receive on remotely reasonable terms possibly vital finance, fall within the remit of the FSA.

    And therein lies the problem because, as we all know, the FSA doesn’t “do” regulation when it comes to the banks.

    Oh well, it was a nice idea that could well be of immense benefit to small businesses and to the wider economy. Still, never mind, the RDR will sort everything out and we’ll all live happily ever after.

  4. It’s about time the government woke up and entered the real world. Setting targets is one thing, enforcing them is another . The banks only want to lend on their own terms which are punitive or they wont play ball. The Enterprise Loan Guarantee Scheme is a prime example where you turn yourself inside out trying to get finance but they will only consider once all sources are exhausted , even if it adds unnecessary cost and admin by forcing you into a route you dont want to take eg invoice discounting. Its all hype and tripe and nobody’s got the ‘balls’ to change it! No wonder small businesses struggle!

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