Lloyds, RBS to be scrutinised over lending
LLOYDS BANKING GROUP and Royal Bank of Scotland are being scrutinised by the government, which suspects the taxpayer-owned banks of pricing their loans to small and medium businesses at artificially high levels, resulting in them missing lending targets.
Both banks, which turned to the government for help in the downturn, have between them agreed to loan £39bn more than they otherwise would have to companies and mortgage customers.
The agreement was a condition of the government’s asset protection scheme (APS), which protected the banks from bad quality loans and investments.
Whitehall insists RBS and Lloyds must hit lending targets to stimulate the economy, but some bankers say the corporate lending targets which have been set are unrealistic.
Both are expected to beat their mortgage targets – £3bn at Lloyds and £9bn at RBS – but the corporate targets of £11bn for Lloyds and £16bn at RBS will not be achievable without reckless lending, according to industry experts.
The news comes as Lloyds continues talks on how to withdraw from the APS.
It is mulling a £15bn rights issue, which would help it avoid further state aid.
The bank has also said it would expect its lending commitment to shrink if it does end up raising the fresh capital.
But the Treasury is considering imposing an estimated £150m break fee for the bank to quit the scheme.
The figure is drawn from a 1 – 1.5 per cent fee on the revenues Lloyds generated because of the APS.