Saturday, August 1, 2009

RBS move to plug borrowing gap

Bank pushes for more small business loan take up
Shipping News Feature

UK - RBS, under the stewardship of CEO Stephen Hester, has launched a drive to attract more small businesses to borrow the balance of £9 billion outstanding from the original £16 billion made available after Government intervention earlier in the year.

Hester's actions, following widespread criticism of his £9.6 million plus pay package when he took over from Sir Fred Goodwin, has moved decisively with an aggressive policy to return the 70% taxpayer owned bank to profitability. Hesters open letter states: “Earlier this year we outlined a series of new initiatives designed to help support our customers and the U.K. economy.” He then points out that the original figure mooted was “Central to the bank commitment to achieve this.”

In response to the Chancellor’s threat of a competition investigation earlier in the week should the major banks fail to increase lending, RBS head of business banking Peter Ibbetson said "Alistair Darling has said that we should be lending more, but I would turn that around the other way and say businesses should be borrowing more from the banks if we want to kick start the economy.”

An RBS survey concludes that only 18% of the 13 million small to medium sized UK businesses plan to increase borrowing levels in the next year. This is presumably to support their viewpoint that it is lack of demand which is responsible for the slow uptake of loans, not tardiness to reform on behalf of the Banks.


Editors note: If it is in context, Peter Ibbetson’s statement underlines the change in attitude still required by the big lenders. He seems to say it is the customers fault (i.e. small to medium size businesses) for not taking up loans which have been readily available. A survey by the Federation of Small Businesses contradicts this. 60% of the respondents to their own survey stated there had been no change in the attitude of their banks since the bail out. Money was still hard to borrow and rates did not reflect the Bank of England base rate. See the blog in the next few days for a full analysis.