Banking: Lending

Lord Sharkey Excerpts

Tuesday 12th November 2013 Lords Chamber

[Lord Newby]

My Lords, as the noble Lord knows, there was a review about whether there should be a formal good bank/bad bank split of RBS. The Government decided that the cost and disruption of doing this was not justified. However, as the noble Lord says, the bank has itself decided to make an internal split, enabling it to have a greater focus on lending and on dealing in a more orderly way with many loans which will not be repaid or will be only partially repaid. Many of these are related to the property sector.

[Lord Sharkey (LD)]

My Lords, in March it was noted that lending to SMEs had shrunk by 25% in real terms since 2009 and it has continued to decline since then. The Business Bank is intended to address the problem and BIS forecasts that the first SME loan portfolio guarantees will be in place by the end of this year. Can the Minister update the House on progress?

[Lord Newby]

My Lords, in respect of SME lending more generally, gross lending is now rising. The picture is clouded by the fact that a lot of SMEs are still paying back loans, so the net position is not as positive, but net lending is down by a much lower amount. As far as lending to SMEs as a whole is concerned, the picture is improving. The Business Bank was launched on 17 October and it aims to support economic growth by bringing together public and private sector funds to improve financial markets for SMEs. Very recently it announced its first commitment of £45 million from the initial £300 million investment programme.