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February 10, 2010

MPs slam Lloyds and RBS on lending

by Gill Montia

Story link: MPs slam Lloyds and RBS on lending

Lloyds Banking Group and Royal Bank of Scotland (RBS) have received a blasting from MPs over the amounts they are lending.

The banks are committed to funding mortgage and business loans of £14 billion and £25 billion respectively by the end of this month, in return for taxpayer support.

However they will be falling short of targets and Public Accounts Committee chairman, Edward Leigh, comments: “The Treasury does not seem to know why the banks are not lending and has few sanctions available to make them change their minds.”

MPs are therefore recommending that “effective and enforceable” sanctions need to be developed.

Both RBS and Lloyds claim they are willing to lend but that demand is suppressed, particularly for lending to firms.

The argument on business lending is certainly supported by the Bank of England’s latest Trends in Lending report, which states: “Some UK businesses have used funds raised on capital markets to repay bank debt.”

According to the Bank, the data are “consistent with some businesses using alternative sources of finance such as capital market issuance, rather than new bank lending, to restructure their debt”.

 

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