BoE says three banks hold back UK lending

18th Jul 2013 10:36

The three 'big banks' are holding back lending to British households and businesses, the Bank of England said.In its quarterly Trends in Lending report the BoE said most banks in its Funding for Lending Scheme (FLS) supplied more credit in the first quarter of the year.But three banks made big cuts in lending, the BoE said. FLS figures show Lloyds Banking Group, Royal Bank of Scotland and Santander cut their lending by a total of £19bn. The report said: "There were diverse lending outcomes across different lenders. A majority of the participating groups increased their lending in the first quarter of 2013. Others contracted their lending, a large proportion of which was accounted for by three large groups. "In part, that reflects a desire by several major UK lenders to reduce the scale of their so-called 'non-core' loan portfolios following the financial crisis, or a need to comply with state aid conditions."The BoE said lack of demand from cautious businesses was part of the reason for lack of lending but its comments suggest that some banks are still holding back while they reorder their balance sheets.Lending to businesses fell £4.5bn in the three months to May. Though conditions have eased since the financial crisis, small and medium enterprises (SMEs) dependent on bank lending have not benefited as much as large companies with access to capital markets.The BoE and the Treasury made changes to the FLS in April to try to encourage banks to lend to SMEs. Some economists think the BoE under new Governor Mark Carney could opt to target SMEs to get the economy moving.