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Banks miss targets for business loans
The Bank of England has published the latest figures for Project Merlin – the agreement which set business loan targets for the major banks – and they show that the banks are falling short of expectations.
Under Project Merlin the five biggest UK banks – Barclays, Royal Bank of Scotland, Lloyds, HSBC and Santander – pledged to lend £190bn in 2011. But the figures suggest that banks are £2bn behind on small business lending in the first quarter of 2011.
Of the £190bn for 2011, £76bn of credit should be made available to small and medium-sized businesses this year. However, lending in the first three months is expected to collectively total £16.8bn compared with a de facto target of £19bn: a shortfall of about 12%.
Last week, Business Secretary Vince Cable warned that the banks could be punished with higher taxes if they failed to meet the Merlin targets.
But the British Bankers' Association has claimed that its members are ‘doing all they can’ to increase lending, and it is unlikely that the banks will face any penalties at this stage, since they still have the rest of the year to make up the shortfall in lending.