The business secretary, Vince Cable has increased pressure on banks to publish lending figures to Small and Medium Enterprises, along with reasons for lending being refused. Following the launch of Project Merlin, which is a one year project, the minister wants to ensure that all the banks involved meet their lending targets.
If the lending targets for small businesses are not met, banks will be faced with new taxes on bonuses and profits. Banks in the UK have insisted that targets not being met is a result of low demand from SME’s, not because the banks are turning down loan requests. However, Cable countered that high interest rates and hesitancy to lend has resulted in far fewer applications for business finance.
The four main banks that have committed to Project Merlin are Lloyds, Barclays, RBS and HSBC. Santander has signed up to the lending commitments only. The largest banks have been given incentives to encourage lending to SME’s, and Cable has insisted that banks publish the details to afford greater transparency. In February 2011, George Osborne announced that bank’s pay would be linked to lending for small businesses. To this end, banks have been told to publish figures for lending to small business in addition to reasons for refusal which may encourage businesses to appeal against decisions.
Half the UK economy is made up of SME’s, who rely on lending to a greater extent than large corporations. Lending to small businesses is a main feature of Project Merlin, to aid recovery of the economy.
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