Banks 'not hit hard enough' say MPs
The Government did not do enough to punish taxpayer-backed banks when they failed to hit targets for lending to small businesses, an influential committee of MPs has said.
The Treasury lacked effective sanctions against Royal Bank of Scotland and Lloyds when business lending fell short by £30 billion, according to a report from the Public Accounts Committee (PAC).
The Treasury looked at various sanctions but decided each had a downside which outweighed the benefits, the report said. The committee said this was "not satisfactory" and the department should consider appropriate sanctions.
The PAC report scrutinised the Treasury's Asset Protection Scheme, launched in January 2009 to protect RBS and Lloyds which are 84% and 43% taxpayer-owned following massive state bailouts in the financial crisis.
PAC chairwoman Margaret Hodge MP said the scheme helped "restore confidence and maintain financial stability" and Treasury staff should be commended.
But she added there were areas for concern.
Ms Hodge said: "The Treasury appears to lack strong determination to use its influence to increase lending to small businesses. We expect it to find effective mechanisms to ensure the banks meet their lending commitments."
RBS had a target of £16 billion of business lending between March 1 2009 and February 28 2010, but it received repayments of £6.2 billion, missing its target by £22 billion.
Lloyds had a target of £11 billion for the same period, but only provided £3 billion, missing its target by £8 billion.
Elsewhere, the report said RBS and Lloyds found it "difficult" to provide the Treasury with robust data on their assets.