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Banks: Regulation

Treasury written question – answered on 8th June 2011.

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Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

To ask the Chancellor of the Exchequer

(1) what sanctions he has considered introducing in the event that the banks participating in Project Merlin do not meet their lending targets;

(2) what sanctions Ministers and officials of his Department and representatives of the banking sector discussed imposing in the event that banks participating in Project Merlin did not meet their agreed lending targets during the negotiations for that agreement.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

On 9 February, the Chancellor announced a new commitment by the UK’s biggest high street banks on lending expectations and capacity. As part of this commitment, the banks intend to lend £190 billion of new credit to businesses in 2011, up from £179 billion in 2010. If demand exceeds this, the banks will lend more. £76 billion of this lending will be to small and medium-sized enterprises (SMEs). This is a 15% increase on 2010 lending of £66 billion.

The commitment to make new lending to SMEs is part of the performance metrics of each bank’s chief executive and those of the senior managers responsible for SME lending. The Government reserve the right to return to this issue and take further measures if the banks fail to live up to their commitments.

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