Belfast Telegraph

Top banks under fire over loans

By Jamie Grierson

Lending by Britain's top five banks shrank every quarter last year, official figures revealed, in an embarrassing blow to the Chancellor's Project Merlin agreement.

After taking loan repayments into account, the five - Lloyds Banking Group, Royal Bank of Scotland, Santander, Barclays and HSBC - saw combined net lending slide in 2011, the Bank of England said, including a 3% drop in the final quarter.

The figures also confirmed that the five banks missed gross lending targets for small businesses in 2011 by more than £1bn but beat the target for all businesses by £24.9bn.

Royal Bank of Scotland, which is 83% owned by the taxpayer, is the culprit for the shortfall in small business lending after the other four lenders came forward and confirmed they had beaten their targets.

Under the Project Merlin agreement, Britain's top five banks said they would increase lending available to SMEs to £76bn this year and boost lending available to all businesses to £190bn.

The British Bankers' Association (BBA) said the overall lending figure demonstrated the banks' commitment to help UK businesses and pointed to Bank of England data that showed SMEs' demand for credit had fallen in three out of the last four quarters.

A spokesman for the Merlin banks said: "The banks' efforts to encourage customers to come forward with borrowing proposals are set against this overall challenging economic environment. The business demand for credit remains weak."

The Project Merlin agreement will not be repeated again this year - although the Government does plan to launch its credit easing programme, which will initially see around £20bn made available over the next two years under a National Loan Guarantee Scheme.