U.K. business secretary Vince Cable said on Monday he intends to
meet Bank of England officials to discuss how a program aimed at
boosting the supply of credit can be improved following "very
disappointing" lending data.
Mr. Cable told the British Broadcasting Corp. in a radio
interview that the U.K.'s Funding-for-Lending Scheme, or FLS, has
yet to show it can improve the supply of loans to businesses.
"It isn't yet countering the very negative trend, the very
conservative lending patterns that the banks in general are
promoting in relation to business," Mr. Cable said.
The minister added that the government is hoping to help tackle
the problem by boosting competition in the banking sector and
nurturing alternative sources of finance for small and midsize
firms starved of credit.
The shortage of lending in the U.K. is "a fundamental problem
and it dates from the fact that several years ago the banking
system virtually collapsed--it caused enormous damage," Mr. Cable
said.
The BOE said earlier on Monday that banks cut back lending in
the U.K. in the final six months of 2012 despite tapping the FLS
for 13.8 billion pounds ($20.7 billion) of cheap funds earmarked
for making loans.
Lloyds Banking Group PLC (LLOY.LN), a lender 39% owned by the
taxpayer after a bailout in 2008, drew GBP5 billion from the BOE
facility in the second half of 2012 but shrank its loan book by
GBP5.6 billion. Mr. Cable told the BBC the fall in net lending by
Lloyds was "hard to fathom" and he's "very disappointed" by their
figures.
A Lloyds spokesman said that the lender was cutting its loan
book as part of wider effort to slim its balance sheet. The lender
has cut interest rates for small and medium business loans.
Royal Bank of Scotland Group PLC (RBS), 81% state-owned, tapped
the BOE for GBP750 million but cut lending by GBP2.4 billion. An
RBS spokesman said that the bank has cut interest rates to small
businesses and that the numbers reflected efforts to shrink other
parts of its loan portfolio.
The U.K. unit of Spain's Banco Santander SA (SAN.MC) took GBP1
billion from the scheme in 2012 but cut net lending by GBP6.3
billion.
In contrast, Barclays PLC (BARC.LN) drew down GBP6 billion and
increased lending by GBP5.7 billion. The Nationwide Building
Society dished out a net GBP3.6 billion in new loans after tapping
the BOE for GBP2 billion.
A clutch of smaller banks, including a unit of retail giant
Tesco PLC (TSCO.LN) and new entrant Metro Bank, expanded their
lending significantly in the final six months of 2012.
Max Colchester contributed to this article.
Write to Jason Douglas at jason.douglas@dowjones.com
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