RBS fights back against government criticism

In a rebuttal to the recent governmental criticism that banks aren’t lending enough, CEO for the Royal Bank of Scotland Stephen Hester recently revealed that the bank has approved over £23bn in new loans in the first half of 2010, mostly business loans.

While small business bank account holders have been the recipient of the lion’s share of its new lending, the bank also stated that despite experiencing a reduction in demand for new loans, it has still returned to profitability despite its collapse during the 2008 banking crisis.

RBS stated that loan application dropped by 7 per cent in the most recent quarter; in addition £45m of its business overdrafts have not been even taken up.

Former Chancellor Alistair Darling had set a business loan target of £50bn for RBS.  Despite claims made by ministers to the contrary, RBS has stated that it is working overtime to find customers willing to apply for the finance.

Mr Hester was quick to point out that his bank had spent a sizable sum on marketing and advertising campaigns to entice businesses.  In addition to reallocating 500 of its most experienced banking staff to aiding small to medium sized businesses in search of credit, RBS set up a new finance hotline for smaller companies in economic need.

Business Secretary Vince Cable has been accusatory in tone towards both businesses and banks, stating that he is more than prepared to use the carrot-and-stick approach to kick-start increased lending. Secretary Cable released a governmental green paper on bank lending practises last week wherein he made a call for banks to restrict their bonus payment schemes and instead reinvest that cash to increase lending to small businesses.

In light of several banks reporting massive profits recently, the government has been more and more strident about warning banks to increase small business lending; several ministers have commented that due to a lack of working capital, many small businesses across the UK are struggling for survival.

Chancellor George recently informed The Sunday Telegraph that the Coalition government would not be tolerant of UK financial institutions refusing to lend to small businesses, insisting that offering finance to these businesses is an economic obligation.

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