Page last updated at 14:44 GMT, Tuesday, 13 October 2009 15:44 UK

Banking crisis hits Scots charity

Lloyds sign
Lloyds TSB merged with HBOS at the height of the banking crisis

A leading charitable foundation is suspending payments, worth £6m a year, to Scotland's charities after being hit by the banking crisis.

The Lloyds TSB Foundation - which gets money from Lloyds Banking Group profits - said the bank's losses meant future funding had become uncertain.

It is suspending new payments, although it will honour existing commitments.

Lloyds Banking Group said the foundation had declined to take part in talks aimed at finding a solution.

In 1985, four independent charitable trusts (Scotland, England & Wales, Northern Ireland, Channel Islands) were created by an Act of Parliament when the Trustee Savings Bank Group was floated on the stock market.

As a result, a covenant was implemented which stated that Lloyds Banking Group should distribute 1% of pre-tax profits, averaged over three years, to the foundations. Scotland receives 19.46% of this amount.

Since then almost 12,000 donations worth about £85m have been made to charities across Scotland, making it one of the leading charitable funders in the country.

Over the past nine months it has been in talks with Lloyds Banking Group to secure its future funding given the uncertainty faced by the bank.

Independence 'threat'

Foundation chief executive Mary Craig said: "Unfortunately, as we remain uncertain as to when we will next receive sufficient money under the terms of our covenant to enable us to continue our grant making activities, we felt we couldn't leave it any longer to alert charities to what is happening as this is as much about their future as it is ours.

"Lloyds Banking Group has put money on the table to get the foundation through the next few years until the group returns to profit."

She said the bank was trying to undermine the foundation's independence as well as cut its funding, and as such it is uncertain when or if the foundation will open its doors to new grant applications from charities.

Lloyds Banking said it had tried to involve the Lloyds TSB Foundation for Scotland in discussions it has been having with the other foundations in the UK to find a "mutually satisfactory accommodation".

In a statement it said: "We are disappointed that the Scottish Foundation has chosen not to participate in these collective discussions, despite a number of invitations for them to do so over a period of months.

"The Group wishes to continue its significant commitment to Scottish communities and the valuable work undertaken by the Group and the Foundation in Scotland. Our intention is to agree with all four Foundations, a mutually satisfactory accommodation which is realistic, fair and durable."

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