MPs have criticised the Treasury’s “lack of effective sanctions” against Royal Bank of Scotland and Lloyds Banking Group when the banks failed to meet lending targets for small businesses under the Asset Protection Scheme.
In a report into the scheme, published this morning, the public accounts committee says the Treasury “lacks strong determination to use influence to increase lending to small business” at the banks which are part owned by the state.
It says the banks missed lending targets by £30bn in 2010 adding that the Treasury should consider how it will “exert influence” on bank lending targets in future.
In 2010, Lloyds committed to £11bn of extra lending to small businesses but missed that target by £8bn. RBS missed its £16bn target by £22bn due to higher than expected repayments of £6bn.
PAC chair and Labour MP for Barking & Dagenham Margaret Hodge says: “We expect the Treasury to find effective mechanisms to ensure banks meet their lending commitments.”
A Treasury spokesman says: “The Treasury will study the report and respond to the committee in due course.”
The committee also slammed RBS and Lloyds for failing to assure the Treasury their assets were not linked to fraud or other criminal activity while the APS was being set up.
Hodge says: “Alarmingly both banks found it difficult to provide the Treasury with appropriate and robust data on their assets.”
A Lloyds spokeswoman says: “The request for this data coincided with the Lloyds TSB merger, making data collection difficult.”
The scheme, launched in January 2009, guaranteed to pay out 90 per cent of RBS’s losses on assets, above an initial £60bn loss to be absorbed by the bank.
Lloyds pulled away from the scheme before signing a final agreement but committed to the lending targets set out during negotiations.
The report says RBS is expected to leave the scheme in 2012.
RBS refused to comment.