Banks "on track" with lending targets

City A.M. Reporter
The country's top banks said they are track to meet government-set targets on lending to businesses, agreed earlier this year to boost the faltering economy in exchange for legislative restraint by the government.

The British Bankers Association (BBA) said that as part of the deal - known as "Project Merlin" - the country's top five banks had delivered £100.4bn in gross new lending to businesses during the first half of 2011.

This included £37.4bn to small-and-medium-sized (SME) enterprises, the BBA added.

The Merlin deal was struck between the Conservative-led coalition government and Royal Bank of Scotland, Lloyds, HSBC, Barclays and Santander UK.

However, there has been consistent criticism from British authorities that the banks are not lending out enough to the economy.

The Bank of England said in May that the banks had fallen short of targets set in the Merlin agreement for the first quarter of the year, although the Treasury said on Friday that lending had increased in the second quarter.

"Today's provisional results are a big improvement, with lending to small businesses up by 20 per cent for quarter two compared to quarter one," said a Treasury spokesperson.

Yet public anger against the banking industry remains high after the government had to rescue Royal Bank of Scotland and Lloyds during the global credit crisis, leaving it with 83 per cent of RBS and 41 percent of Lloyds.

In June, business minister Vince Cable reiterated threats to impose punitive taxes on banks if they failed to meet the Merlin lending targets.