Banks miss small firms loan target of Project Merlin

THE UK’s five largest banks have failed to meet a Project Merlin target for making £76bn of credit available to small and medium size businesses (SMEs) this year, the Bank of England is set to reveal today.

Preliminary figures showed that in the first three months of the year, the banks – RBS, Lloyds, Barclay, HSBC and Santander – lent £16.8bn to small businesses. That is a 12 per cent shortfall on the quarterly target of £19bn.

But the Treasury said it is cheered by overall business lending, which has come closer to the Merlin benchmark during the last three months, with the five institutions lending around £47.2bn compared with an expected quarterly rate of £47.5bn.

The Merlin deal set out annual lending targets in a bid to improve transparency in the banking sector, though the tallies from the latest quarter are the first indication of how the banks are living up to this element of the Project Merlin commitments.

The firms said in February they were able to lend £190bn during the year, £76bn of which was to go to smaller businesses.

Yesterday a spokesman for the Bank of England refused to comment on the figures, saying the Bank’s only role was providing a statistical service for the government.

Bank chiefs will no doubt be on tenterhooks waiting for government reaction to the finalised figures today.

Prime minister David Cameron has already warned they could face a barrage of new bank levies and taxes for failing to keep credit flowing.