RBS Reviews Small Business Lending

Royal Bank of Scotland (RBS) has launched an independent review into its lending to small and medium-sized businesses (SMEs)

RBSRBS, the mostly taxpayer-owned bank, has appointed a team to carry out an independent review of its lending standards and practices for small and medium-sized firms.

The bank, recently touted as being nearly ready for privatisation and losing its chief executive, Stephen Hester, is 81% government owned, meaning that taxpayers’ money was used to rescue the bank at the peak of the financial crisis.

RBS has come under heavy criticism recently for failing to boost lending to the business sector despite having access to discounted lending rates under the government-backed Funding for Lending Scheme.

RBS’ net lending to businesses had apparently fallen by around £1.6 billion in the first quarter of 2013, prompting Business Minister Vince Cable to admit that the scheme might need "adjusting".

The team appointed to review RBS’ lending to small businesses consists of the Bank of England’s Deputy Governor, Sir Andrew Large, backed by management consultancy firm, Oliver Wyman.

Despite its £1.6 billion shortfall in lending to SMEs, the bank, and its sister lender, NatWest, admitted that there is £20 billion, mainly from a surplus in corporate deposits, that it wants to lend to small firms.

Chris Sullivan, RBS’ CEO of UK Corporate Banking, said of the current situation:

“We are the biggest lender to SMEs in the country, and have identified £20 billion in surplus deposits that we want to put to work to support the economy – but we constantly hear that businesses can’t get the finance they need. We have to bridge this gap.”

However, Sir Andrew Large, leading the new enquiry, added:

“There is a disconnect between what the bank says it is doing on lending, and what many businesses say they experience on the ground. That is why we have been asked to conduct an independent review to establish what is going on, and what steps can be taken”

The review will take place over the summer with its findings and recommendations due to be published in the autumn.

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