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Hope for SMEs over lending pledge 22 December 2010
James Falla (about the author)

Britain's biggest banks have offered to increase lending to small and medium-sized businesses during truce talks with the Government.

Bank bosses put a 'number of proposals on the table' to boost the flow of loans to firms during negotiations with Chancellor George Osborne and Business Secretary Vince Cable, a government spokesman said.

The talks are aimed at hammering out a settlement between the financial industry and the Coalition ahead of the year-end bonus round, which is expected to see £7bn doled out to City workers.

In return for trimming the lucrative payouts and pumping more credit into the economy, the banks are hoping to secure an agreement from the Government not to impose any new taxes on the industry.

No specific commitments

The heads of Barclays, HSBC, Royal Bank of Scotland, Lloyds Banking Group and Santander are said to have offered to raise lending to SMEs by £10bn to a total of £70bn next year.

But it is understood that no specific commitments were made on cutting bonuses during the 90-minute meeting in Whitehall.

Prime Minister David Cameron stressed that addressing the dearth of affordable loans for businesses was the main priority - following accusations from Cable that the Conservatives were going soft on the banks.

Cameron said: 'We do want to see progress on this (bonus) issue and we also want to see an expansion of business and particularly small business lending.'

A Government spokesman said the 'constructive' talks focused on lending to SMEs, 'discipline' on year-end pay and how the banking industry can 'best support economic growth and job creation'.

Out of touch lending criteria

However, James Falla of beatmydebt.com  said that he was concerned that the banks would say one thing and do another.

"It is easy for banks to suggest that they can make more money available for lending. However they can refuse to lend on the basis that business plans they see are too risky. The problem is that policies are being made far above the grass roots level by people who have no realy concept of the potential of individual businesses" he said.

"Banks would do well to put more resource into finding a way of better assessing each individual business plan and sharing the risk with business owners" Falla added

Source: This is Money