Page last updated at 09:29 GMT, Tuesday, 9 February 2010

Lloyds and RBS 'failing to lend'

RBS and Lloyds logos
MPs said the banks' lending record had caused "widespread dismay"

Royal Bank of Scotland and Lloyds Banking Group have been criticised by a committee of MPs for failing to lend enough to homeowners and businesses.

The Committee of Public Accounts said the two part-nationalised banks would fall short of a pledge to lend a total of £39bn by the end of February 2010.

The legally binding commitment was made by the two banks in exchange for taxpayer support received in 2008.

The committee called on the government to do more to force the banks to lend.

Edward Leigh, chairman of the Committee of Public Accounts, said the bailed out banks' lending performance had caused "widespread dismay".

"The Treasury does not seem to know why the banks are not lending and has few sanctions available to make them change their minds," he said.

'Limited demand'

Royal Bank of Scotland (RBS) is committed to lending £25bn in mortgage and business loans, while Lloyds has pledged to lend £14bn.

We are growing our business lending faster than the rest of the market, but... demand has been limited
Stephen Pegge, Lloyds Banking Group

The government currently has an 84% stake in RBS, while it owns 43% of Lloyds.

Total taxpayer support for the UK banking sector has now topped £850bn according to a recent report by the National Audit Office.

Speaking to the BBC, Lloyds spokesman Stephen Pegge admitted it was "unlikely" that targets for business lending would be met, saying that there was insufficient demand from companies.

"We are still saying yes to 80% of businesses who want to borrow, but there will be some businesses that it will be difficult to provide that extra finance for," he said.

"We are growing our business lending faster than the rest of the market, but it's subject to demand, and that demand has been limited."

But Stephen Alambritis from the Federation of Small Businesses argued that banks were not making it easy for businesses to borrow money.

"Businesses are balking at the interest rates charged and the tortuous process they are forced to go through to borrow money," he said.

"Banks are going over the whole business even for a small overdraft extension."

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