Cable warns banks to lend more to small businesses

Friday, 20 May 2011 10:01

Lending to small businesses remains billions of pounds short of target according to a Bank of England report to be published on Monday.

The report will show that lending targets of the major banks, agreed as part of Project Merlin, are well below the agreed levels.

As part of the Project Merlin agreement, five of the major banks operating in the UK, Lloyds, Barclays, Royal Bank of Scotland, HSBC and Santander agreed to lend £190 billion to businesses in the UK during 2011.

At least £76 billion of this figure should go to small and medium sized businesses as part of the agreement. This would represent a rise of £10billion or 15 per cent on the year before.

The agreement influenced the coalition government not to put a limit on the amount of bonuses the banks could pay to top executives.

Vince Cable, the Business Secretary warned that the banks are unlikely to meet agreed targets under Project Merlin and that they would have to make up any shortfall during the rest of the year.

He also warned that the banks could face new taxes if they fail to meet the agreed lending targets.

Mr Cable said: “Certainly the recent trends leading up to Monday's announcement are not greatly encouraging and there clearly is a problem with small and medium-sized businesses. If the banks don't deliver there are options open to the Government, including taxation.”
 

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