CfRC calls for individual bank data on SME lending to be made available to Local Economic Partnerships
The Centre for Responsible Credit has today welcomed the Department for Business, Innovation and Skills publication of individual bank performance in supporting small to medium enterprises through lending backed by the Enterprise Finance Guarantee but has called for this to be broken down to a local level to enable banks to be held to account by Local Economic Partnerships.
The data published by the Department shows that much more needs to be done to raise the performance of some banks in helping Britain's businesses to get access to finance. In particular, the data indicates that:
- The overall volume and value of EFG backed lending has been in decline for the past three years. In 2009/10 over 7,000 guaranteed loans were made with a value of around 737 million. However, in the past year this has fallen to around 1,800 loans worth around 200 million.
- Shares in the total number of EFG backed loans by the ‘Big Four’ (Barclays, HSBC, Royal Bank of Scotland, and Lloyds Banking Group) have fallen more sharply than the general trend implies, with Big Four lending shares down from 91.5 per cent in 2009/10 to just under 87 per cent in 2012/13.
- Within the Big Four there has been a sharp reduction in the share of EFG backed lending over the period by Lloyds Banking Group. In 2009/10 Lloyds accounted for 26 per cent of loans made under the scheme and 16 per cent of its total value. However, in the most recent year these numbers have fallen to 7.9 per cent and 7.4 per cent respectively. Lloyds lending backed by the scheme has 'collapsed' from a value of just over £120 million in 2009/10 to only £15 million in 2012/13.
- Barclays has also reduced the number of its EFG backed loans over the same period – from a share of 18.6 per cent of all loans made in 2009/10 to 13.6 per cent in 2012/13. However, the value of these loans has not reduced by as much – 16.2 per cent to 15 per cent – indicating that Barclays is much making fewer loans but that these have slightly higher individual values than previously. In line with the fact that total lending backed by EFG is much reduced, Barclays made loans worth only £30 million worth of loans in the last year compared to £119 million in 2009/10.
- The figures also indicate that whilst Royal Bank of Scotland remains the single biggest player in the scheme: accounting for around 44 per cent of the value of EFG backed loans – it has reduced its lending in line with the overall reduction witnessed in the past three years. In 2012/13, RBS made loans worth £83 million compared to over £300 million in 2009/10.
- However, lending at HSBC has held up much better albeit that it has started from a relatively low base. In 2009/10 HSBC made a total of 577 loans worth £78 million. In 2012/13, these figures were 390 and £51 million respectively. As a consequence, HSBC has increased its share of total EFG backed lending both in terms of loans made (from 8 per cent to 21 per cent) and of the total value (from 10 per cent to 25 per cent).
Commenting on the data, CfRC Director, Damon Gibbons, said:
"The Government is to be congratulated on releasing this data, which sheds new light on the performance of individual banks in supporting small to medium enterprises. The overall data indicates that much more is needed to get finance to our businesses. All of the Big Four banks have signficantly reduced their lending backed by the Enterprise Finance Guarantee ('EFG') scheme. However there are variations in performance. For exmaple, the reduction in EFG backed lending is much more pronounced at Lloyds and clearly less so at HSBC, with the latter signficantly increasing its share of total lending backed by the scheme as a result. This level of transparency is important in terms of the accountability of the individual banks. But it would be even better if Government went further and provided a break down of this information at the local level so that Local Economic Partnerships and other stakeholders can get the banks around the table in their areas and look at what more can be done to improve provision."
We also urge Government to take that approach in respect of other state backed lending schemes, including the Funding for Lending Scheme which is backed by both the Treasury and the Bank of England."
Notes for Editors
The Centre for Responsible Credit is a dedicated policy unit within the Cente for Economic and Social Inclusion established to monitor developments in the UK's credit markets and develop policy proposals for responsible lending to support sustainable economic growth.
Damon Gibbons is available for comment on 07961869473