Lending records to be scrutinised

The five banks - Lloyds Banking Group, Royal Bank of Scotland, Santander, Barclays and HSBC - agreed with the Government in the Project Merlin talks to make £76bn of lending available to small and medium-sized enterprises (SMEs).

The Bank of England will confirm the total handed out this morning but the British Bankers’ Association came forward on Friday with provisional figures and said £74.9bn was loaned in 2011 after Barclays revealed its own lending and a number of its peers followed suit.

However, the banks loaned a total £214.9bn to all UK businesses, exceeding their target of £190bn, the BBA added. It is understood that RBS, which is 83 per cent owned by the taxpayer, is the culprit for the shortfall in SME lending although it will not report its performance until full-year results later this month. The BBA said the overall lending figure demonstrated the banks’ commitment to help UK businesses and pointed to Bank of England data that showed SMEs’ demand for credit had fallen in three out of the last four quarters.

A spokesman for the Merlin banks said: “The banks’ efforts to encourage customers to come forward with borrowing proposals are set against this overall challenging economic environment. The business demand for credit remains weak.”

But the failure to hit targets will reignite the row over banking lending amid large pay-outs to staff. It is understood that the Project Merlin agreement will not be repeated this year and even the part-nationalised banks RBS and Lloyds will not be set targets by the Government.

In addition, it is unclear whether Chancellor George Osborne has put any penalties in place for the banks’ failure to hit one of the targets.

Santander and Barclays have said they have hit their targets under the agreement, while Lloyds said it exceeded its measure on SME lending and has yet to disclose its overall performance. RBS chief executive Stephen Hester defended the performance in interviews this week, pointing out that its lending will not be far short of all the other banks combined.

He added: “There is no bank in this country coming close to punching above their weight in the way we are. Forget Project Merlin and how it’s defined - that’s damn impressive. People have lost sight of that.”

Barclays said it had exceeded targets by 13 per cent in 2011, after it handed out £43.6bn of new lending to businesses, including £14.7bn to SMEs.

Chief executive Bob Diamond said he was “proud” of the performance as the bank claimed to have supported 108,000 start-ups and returned 1,900 existing businesses to health.

Part-nationalised rival Lloyds Banking Group also beat its target after lending £12.5bn to SMEs, compared with its £11.7bn benchmark.

Net lending to SMEs grew 3 per cent and will remain positive this year under a new commitment made today.

Santander UK lent £8.7bn to businesses in 2011, a 25 per cent increase on the previous year and exceeding its target of £6.7bn. Of this, £4.3bn went to smaller firms - £300m more than its target.