BANKS’ LENDING AGREEMENTS

Q. WHAT DID THE BANKS COMMIT TO?

A. Under the terms of “project Merlin”, a deal with the Treasury aimed at reviving lenders’ image, five banks – RBS, Lloyds, HSBC, Barclays and Santander UK – agreed to make £190bn in credit available to businesses this year, versus £179bn in 2010. They earmarked £76bn of this for small businesses.

Q. HOW MUCH HAVE THEY LENT SO FAR?

A. Official figures released yesterday showed that banks’ gross lending facilities for the first-quarter of the year were £47.3bn. In order to use up the whole £190bn banks have committed for the year, they would have to lend an average of £47.5bn a quarter.

Q. SO THEY MISSED THE MERLIN TARGET?

A. The Merlin figure is not technically a target, although it is being treated as one. Banks have agreed to set aside the capital to lend £190bn for the year if asked for it, but their ability to lend that amount depends on demand: if businesses aren’t prepared to take loans or credit facilities at prices banks deem feasible, there is little they can do.