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November 7, 2009

RBS called to account on business lending

by Gill Montia

Story link: RBS called to account on business lending

The Treasury has asked Royal Bank of Scotland (RBS) to provide evidence that UK businesses are choosing not to apply for its loans.

In return for taxpayer support, RBS is committed to lending an additional £25 billion, £16 billion of which is earmarked for firms.

However, the about-to-be 84% state-owned bank has admitted to falling behind on its commercial lending target because of lack of demand and in presenting its third-quarter results, the group reported that total net lending in the first nine months of the year fell by £500 million.

According to a BBC report, the bank has now been ordered to produce the terms and conditions of its business loans for ministers to scrutinise.

It is worth noting that in its Trends in Lending report published in September, the Bank of England stated that total net lending to businesses fell across all the main industrial sectors during the second quarter of 2009.

Evidence suggested that corporates were turning to the markets to raise funds, with some companies apparently repaying bank debt using money raised on the capital markets.

The report concluded “overall this year there has been a marked change in corporate financing patterns relative to 2007 and 2008″.

 

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