Treasury looking to LSE to boost lending to small firms

Tim Wallace
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BOOSTING access to debt markets and forcing state-owned banks to lend to smaller firms are among plans being discussed by the Treasury to increase lending to small and medium-sized enterprises (SMEs).

One idea is to use the London Stock Exchange’s (LSE) order book for retail bonds (ORB) market, allowing smaller debt issuances with lower minimum investment levels than in usual bonds.

Typical corporate bonds may require minimum investments of around £50,000, whereas that can be below £1000 in the ORB market.

Negotiations are at a “very early stage,” an LSE spokesman told City A.M.

The Treasury confirmed it was looking at a wide range of options, including Sir Mervyn King’s suggestion to force state-owned banks to lend more.

RBS and Lloyds denied they face pressure to alter their lending criteria.

“The government has asked us to operate as a commercial bank,” a spokesman from RBS told City A.M.

Lloyds too said it was under no new pressures, but pointed out that it has just been lent £150m at favourable interest rates by the European Investment Bank, which Lloyds will lend on to SMEs so they can benefit from relatively cheap financing.