My honourable friend the Economic and Business Minister, Department for Business, Enterprise and Regulatory Reform (Ian Pearson) has made the following Written Ministerial Statement.

On 14 January 2009, I informed the House that the Department for Business, Enterprise and Regulatory Reform intended to introduce a working capital scheme as part of the Government’s measures to enhance financial stability and support increased lending to business. Its implementation was subject to EU state aid clearance which was granted by the Commission on 24 March.

I am pleased to inform the House that on 31 March the department signed a guarantee agreement with Royal Bank of Scotland PLC (RBS) and National Westminster Bank PLC (NatWest) to provide guarantees in respect of portfolios of loans that will enable RBS and NatWest to increase their lending to UK businesses.

The agreement with RBS and NatWest is the first of its kind under the working capital scheme. It represents an important step towards achieving the Government’s aim of getting increased credit flowing to UK businesses during these difficult times.

RBS and NatWest have agreed that the capital released by their participation in the scheme will be redeployed in support of lending to creditworthy SMEs and mid-corporates. This forms part of the £16 billion of additional lending to businesses they committed to on 26 February.  This additional lending commitment took effect from 1 March.

Discussions are well advanced with two other banks in relation to their participation in the scheme.

The scheme runs until 31 March 2011.