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Tuesday, May 24, 2011

Is it time to get tough on the banks?

Yesterday's Independent reports that new figures from the Bank of England reveal that the UK's top banks are on course to miss Project Merlin lending targets for small businesses.

They say that Barclays, Royal Bank of Scotland, Lloyds Banking Group, HSBC and Santander UK lent £16.8 billion to small and medium enterprises (SMEs) in the first three months of the year, despite agreeing with the Government to increase lending to SMEs to £76 billion this year, equating to £19 billion in the first quarter.

They add that the figures are likely to provoke outrage as the banks have been accused of being unwilling to lend to credit-worthy small businesses as they continue to award high pay packages. However, they say that the banks are likely to defend their position by saying they only agreed to increase "lending capacity" and there is nothing they can do in the absence of demand for new borrowing.

Whether this is the case or not is open to dispute. I have come across many small businesses in my region who want to borrow money to expand or to continue trading only to find that the Banks previous willingness to help has disappeared altogether.

The Government has recognised that economic recovery is dependent on the active and willing cooperation of the banks and has tried to accomodate that by working with them. However, if the banks are not going to play ball then maybe it is time to use the Government's position as major shareholders to put in place policies and people at the top of these organisations who will.
It's about time the FM at least considered the pro's and con's of a Welsh Stock exchange rahter than just dismiss it by ignoring it.
'Is it time to get tough on the banks' in the context of small business lending: imho, YES!

Stifling small business expansion has done great damage to the fabric of the nation's economy.

If the 16.9% interest demanded by Barclay's of a long-term customer seeking a business loan, as reported on Radio 4 this week, is typical, then I am not surprised that demand is low.
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