US Community Reinvestment Act

Treasury written question – answered on 7th September 2011.

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Photo of David Ward David Ward Liberal Democrat, Bradford East

To ask the Chancellor of the Exchequer if he will consider bringing forward legislative proposals with provisions comparable to the US Community Reinvestment Act.

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

The Government has undertaken a range of measures to ensure that financial institutions lend to all sections of society, and will continue to ensure that the financial sector supports growth in the wider UK economy.

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 SMEs. This is a 15 per cent increase on 2010 lending of £66 billion.

As part of this agreement, the banks also agreed to provide £200 million to the Big Society Capital group. This is in addition to the £400 million of capitalisation from English dormant bank accounts. The group will act as a social investment wholesaler and play an important ' role in accelerating the growth of the social investment market in the UK.

Furthermore, on Tuesday 19 July the draft Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011 was laid in Parliament for its final period of scrutiny. It will present many opportunities for credit unions to develop their services and expand their membership. For example, the changes in membership rules will allow for recruitment of members in new areas and for partnerships and companies to become members and invest in their local credit union. These new members will also be able to take out loans from their credit union to help their own businesses grow.

The Government also recognises the importance of Community Development Finance Institutions (CDFIs) which operate to support access to finance in deprived areas and continues to support the sector through:

£30m of new funding through the Regional Growth Fund, for a new wholesale fund for the community development finance sector, subject to due diligence; making a commitment to re-notify the Community Investment Tax Relief to the EU Commission to incentivise private investment in disadvantaged communities and also consult on how the scheme can be made more effective; design changes to the Enterprise Finance Guarantee to enable smaller and specialist lenders including CDFIs to participate fully as EFG accredited lenders; and contributing to the European PROGRESS Microfinance Facility, which CDFIs can bid to for support.

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