RBS in the dock over failure to hit Merlin’s business lending targets

ROYAL Bank of Scotland has been blamed for British banks failing to meet stringent UK government targets on lending to small firms.

The five banks – Barclays, HSBC, Lloyds Banking Group, RBS, and Santander – loaned £74.9 billion to small and medium-sized enterprises (SMEs) in 2011, the British Bankers’ Association said.

But under the Project Merlin agreement they said they would increase lending to £76bn and boost the amount available to all businesses to £190bn. Overall lending was almost £215bn, according to yesterday’s figures.

Three of the five banks rushed out statements confirming they had met or surpassed their targets.

Yesterday, Barclay’s chief executive Bob Diamond hailed the bank’s business lending record in 2011 as it beat the targets.

Barclays delivered £43.6bn of gross new lending to UK businesses, including £14.7bn to SMEs, exceeding its Merlin target by 13 per cent. “We really got on our horses to get businesses going,” said Diamond.

Part-nationalised Lloyds said it lent £12.5bn to SMEs in 2011 – ahead of an £11.7bn target under the Merlin deal.

Spanish bank Santander also confirmed it had exceeded its lending commitments after it increased business lending by 25 per cent last year.

It provided £8.7bn to businesses in 2011, exceeding its Merlin commitment of £6.7bn.

Of this £4.3bn went to SMEs, again exceeding the £4bn pledged.

HSBC declined to reveal its actual figures ahead of its results in coming weeks. But earlier this month the bank confirmed that it met its Merlin lending intentions in 2011, exceeding its full-year target to provide £38.8bn of lending facilities to UK business customers and supplying gross new lending facilities of more than £11.7bn to SMEs.

RBS, 83 per cent owned by the taxpayer, was identified as the culprit for the shortfall in SME lending although it will not report its performance until full-year results later this month.

It is understood that the Merlin agreement will not be repeated this year.

The figures are set to be officially released by the Bank of England on Monday but were provisionally made public through the BBA yesterday.

Earlier this week, RBS chief executive Stephen Hester spoke to The Scotsman and defended the bank’s lending performance, after his chairman, Sir Philip Hampton, had hinted last week the bank might not have met its SME lending criteria.

Yesterday Hester said: “There is no bank in this country coming close to punching above their weight in the way we are. Forget Project Merlin and how it’s defined – that’s damn impressive. People have lost sight of that.”

RBS said that it has met its Merlin lending commitments in 2011 and has a much bigger share of the market – the Edinburgh-based lender provided almost half of all SME loans in 2012, more than Barclays, HSBC, Lloyds and Santander combined.

Colin Borland of the Federation of Small Businesses in Scotland said: “If small business lending targets are being missed, then you’d expect most of the shortfall to lie with whoever has the lion’s share of the small business lending market.”