Financial News

  • 2 March 2014, 21:27

Cable Demands Talks Over RBS Lending Targets

Vince Cable is to seek talks with the chief executive of Royal Bank of Scotland (RBS) about the introduction of new lending targets at the state-backed institution.

Sky News understands that Mr Cable is "disappointed" that Ross McEwan did not announce specific targets for net lending to small and medium-sized business (SME) customers as part of his overhaul of RBS unveiled on Thursday.

The Business Secretary plans to "follow up with" Mr McEwan to encourage him to reconsider the decision, an aide said.

RBS, which has been criticised for its treatment of SME customers and is now the subject of a formal probe by the City regulator, announced last autumn that it wanted to increase gross lending to SMEs this year by at least 10% to more than 9bn.

This would "ensure we can support thousands more businesses with their expansion plans", the bank said at the time.

However, it has eschewed net lending targets, which take into account loan repayments made by SME customers.

Mr Cable is keen to have a constructive relationship with Mr McEwan, and said on Thursday that he was pleased with the outline of RBS' new strategy, which involves slimming the bank from seven divisions to three: personal and business, commercial and private and corporate and institutional banking.

"I am pleased by the overall direction of travel of RBS, getting away from the disastrous obsession with large and risky casino banking of the Fred Goodwin years, focusing instead on British customers and British business," he said.

"British taxpayers are still paying for the terrible mistakes of the past and I see no sign yet of a turnaround in the continuing decline of net lending to small business.

"The public will simply not understand why big bonuses and large salaries continue to be paid out by a loss-making public enterprise, still underperforming in many areas."

George Osborne, the Chancellor, struck a more conciliatory tone in relation to RBS' new strategy, which analysts said was unsurprising given the role he had played in the departure of Stephen Hester, Mr McEwan's predecessor.

As Sky News revealed, the new RBS structure involves a shake-up of the bank's top management, including the appointment of Alison Rose as the bank's most senior female executive.

RBS has not been the subject of formal lending targets since it was part of the industry-wide Project Merlin initiative in 2011.

Designed to restore trust in the British banking sector, it involved Barclays, HSBC, Lloyds Banking Group, RBS and Santander agreeing to lend specific sums to homeowners and SMEs.

Although the former target was met, the latter was not, exacerbating the tension between the major banks and politicians.

RBS was also forced to sign up to lending targets in the two years which preceded Project Merlin, with Mr Hester's remuneration linked partly to the achievement of those goals.

The bank declined to comment on Friday, although a source close to the bank said that it had not received a formal request from the Treasury or UK Financial Investments (UKFI) to reintroduce net lending targets.

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