Banks: Lending

Lord Forsyth of Drumlean Excerpts

Wednesday 5th February 2014 Lords Chamber

[Lord Popat]

My Lords, gross bank lending has gone up for the past 12 months, although net lending has fallen in three out of the past 10 months. Overall lending is a lot more than it was in 2012. I am pleased to say that, although net lending has dropped, there are other sources of finance available to SMEs and businesses from which they can borrow money. The recent responses to the Bank of England credit conditions survey reported that the overall availability of credit to the corporate sector increased significantly in the final quarter of 2013. I normally stick to my own department, and I have not had any meetings with the Treasury.

[Lord Forsyth of Drumlean (Con)]

My Lords, will my noble friend explain why the capital requirements for banks that are lending to small businesses require them to maintain a considerable amount of capital for the loans they provide, whereas, if they buy Greek bonds, they are not required to provide any capital at all? Is it therefore any wonder that there is a distortion towards buying bonds from sovereign bodies rather than lending to small business? Should we not look at the regulation?

[Lord Popat]

My Lords, the regulations are being reviewed, but I agree with the noble Lord. A large number of medium-sized businesses are now switching from bank borrowing to issuing bonds.