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Banks: Regulation

Volume 497: debated on Wednesday 14 October 2009

To ask the Chancellor of the Exchequer what steps he has taken in the last three months to require banks to provide (a) financial resources and (b) credit lines to companies and businesses which wish to purchase construction and agricultural vehicles and equipment from UK companies. (247883)

[holding answer 15 January 2009]: I have been asked to reply.

The Government recognise that the current economic climate is causing significant difficulties for established businesses and start-up firms alike.

The recapitalisation of the banks and subsequent measures to support bank lending, are essential to secure and sustain a competitive UK lending market. This is essential for businesses given that the vast majority looking for finance will continue to seek support from mainstream lenders, and not from Government supported schemes.

The UK is the first country in the world to have negotiated legally binding lending commitments with banks receiving state support. The Royal Bank of Scotland have committed to £25 billion of additional net lending over the next 12 months, including £16 billion for lending to businesses. Lloyds have committed to an additional £3 billion of gross mortgage lending and £11 billion of additional net lending to businesses over the next 12 months. Both agreements are in effect immediately.

While supporting lenders to continue lending, the Government have also introduced targeted support for viable businesses who continue to struggle to raise finance from commercial sources. For small and medium businesses who find themselves on the margins of commercial lending decisions, the £13 billion Enterprise Finance Guarantee encourages lenders to extend their usual lending criteria by providing them with additional security in the form of a Government backed guarantee.

The Government continue to work with the banks and business representative bodies, through fora such as the Small Business Finance Forum, and we continue to monitor bank lending to SMEs, with the Bank of England.

The measures delivered by the Government are across all sectors, including the construction and agricultural sectors.