Hester: we cannot create demand for SME lending

RBS chief Stephen Hester hit back at critics of the state-owned lender yesterday, saying that the bank is “open for business” but that small and medium-sized businesses (SMEs) simply don’t want to borrow.

He said: “We want to lend more... But already today we lend way more than any other bank.” Despite RBS’s willingness, he said that SMEs’ use of their overdraft facilities with the bank had declined by five per cent last year.

The problem is with a lack of confidence among SMEs, he argued. “We can’t force our customers to borrow,” he told the British Chambers of Commerce.

“One of the issues we all have to confront right now is that businesses don’t have confidence. And when businesses don’t have confidence, they don’t invest, they save more, they pay down debt.”

His assertion that the cost of credit is not what is limiting SME borrowing casts doubt on how effective the Treasury’s credit easing scheme for SMEs can be. It aims to cut the cost of credit by one per cent.