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| Version 3 | Version 4 |
|---|---|
| Vince Cable threatens banks over lending | Vince Cable threatens banks over lending |
| (about 2 hours later) | |
| Business Secretary Vince Cable has said the government is willing to take "further action with tax on banks" if they do not increase lending to small and medium-sized enterprises (SMEs). | Business Secretary Vince Cable has said the government is willing to take "further action with tax on banks" if they do not increase lending to small and medium-sized enterprises (SMEs). |
| Mr Cable told MPs on the Business Committee that the level of lending to SMEs was a "serious problem". | Mr Cable told MPs on the Business Committee that the level of lending to SMEs was a "serious problem". |
| Under the Project Merlin agreement, the UK's biggest banks are committed to lending £76bn in 2011 to SMEs. | Under the Project Merlin agreement, the UK's biggest banks are committed to lending £76bn in 2011 to SMEs. |
| The bosses of the four biggest banks are also giving evidence to MPs. | |
| The Treasury Committee will hear first from Douglas Flint of HSBC and Stephen Hester of Royal Bank of Scotland, and then from Bob Diamond of Barclays and Antonio Horta-Osorio of Lloyds. | The Treasury Committee will hear first from Douglas Flint of HSBC and Stephen Hester of Royal Bank of Scotland, and then from Bob Diamond of Barclays and Antonio Horta-Osorio of Lloyds. |
| They will answer questions on the Independent Commission on Banking. | They will answer questions on the Independent Commission on Banking. |
| 'Catch up' | 'Catch up' |
| "The chancellor and prime minister have made it clear that if we don't get results, they have said we should take further action with tax on banks," Mr Cable said. | "The chancellor and prime minister have made it clear that if we don't get results, they have said we should take further action with tax on banks," Mr Cable said. |
| Sanctions could include a tax on profits, balance sheets or bonuses, he said. | Sanctions could include a tax on profits, balance sheets or bonuses, he said. |
| But he also said it could be a problem if some banks met lending targets, while others did not. | But he also said it could be a problem if some banks met lending targets, while others did not. |
| Under Project Merlin, the amount the four biggest banks, plus Santander, agreed to lend to SMEs equates to £19bn a quarter. However, in the first three months of the year £16.8bn was lent. | Under Project Merlin, the amount the four biggest banks, plus Santander, agreed to lend to SMEs equates to £19bn a quarter. However, in the first three months of the year £16.8bn was lent. |
| Mr Cable acknowledged that while Project Merlin did not set specific quarterly targets, there was now a "catch-up element" involved. | Mr Cable acknowledged that while Project Merlin did not set specific quarterly targets, there was now a "catch-up element" involved. |
| He said there was a mixture of factors involved in why banks were not lending as much as the government wanted. | He said there was a mixture of factors involved in why banks were not lending as much as the government wanted. |
| One was the level of demand - banks say it is weak, but businesses say they are being discouraged from applying in the first place. | One was the level of demand - banks say it is weak, but businesses say they are being discouraged from applying in the first place. |
| The government's requirement that the banks hold more capital was also having an effect, he said, as banks were being more cautious in their lending. | The government's requirement that the banks hold more capital was also having an effect, he said, as banks were being more cautious in their lending. |
| He also said that banks had gradually moved away from "relationship banking", meaning that "at a time of crisis like this they don't have the infrastructure in place to assess the risk of lending to small business". | He also said that banks had gradually moved away from "relationship banking", meaning that "at a time of crisis like this they don't have the infrastructure in place to assess the risk of lending to small business". |
| Changing behaviour | Changing behaviour |
| Mr Cable said if banks did not increase SME lending, the UK's economic recovery would suffer. | Mr Cable said if banks did not increase SME lending, the UK's economic recovery would suffer. |
| "We believe there is an issue with the supply and cost of finance and it is inhibiting recovery," he said. "Certainly, if it's not dealt with, it will inhibit recovery as we move into more rapid growth." | "We believe there is an issue with the supply and cost of finance and it is inhibiting recovery," he said. "Certainly, if it's not dealt with, it will inhibit recovery as we move into more rapid growth." |
| However, he added that he had anecdotal evidence that some banks were changing their behaviour, highlighting Lloyds as taking the issue very seriously and meeting their targets. | However, he added that he had anecdotal evidence that some banks were changing their behaviour, highlighting Lloyds as taking the issue very seriously and meeting their targets. |
| "Some banks are trying harder than others," he said, also singling out Santander for its efforts. | "Some banks are trying harder than others," he said, also singling out Santander for its efforts. |