Small Business Bank Lending Deal Stalls
A deal between the coalition government and the UK’s top banks on lending to small businesses has stalled, according to a report by the BBC.
"Project Merlin" was supposed to see Britain’s four biggest banks (RBS, Barclays, HSBC and Lloyds) increase lending to small business with bankers showing restraint in the payment of bonuses, particularly at Royal Bank of Scotland and Lloyds which are 84% and 41% "taxpayer owned" respectively.
The deal was expected to be confirmed in the forthcoming week with lending to SMEs to increase by around 10% in 2011. The total of small business lending was estimated to be in the region of £200bn and it was anticipated that the government might be lenient on banking bonuses if the big four were to simply increase business lending.
But the agreement seems to have stumbled around governance issues with the banks arguing that lending to weaker businesses would breach rules on any lending being in the best interests of the shareholders and concerns from the banks over new practices being tabled by the Independent Commission on Banking (ICB), namely the splitting of retail and investment banking divisions of the banks and the notion that there is not enough competition in high street banking.
The small business lending deal is still expected to be signed at some time soon but "the devil is in the detail", particularly if the banks don’t seem to see Project Merlin being in their favour.