Banks ‘not hit hard enough over lending’

The Government did not do enough to punish taxpayer-backed banks when they failed to hit targets for lending to small businesses, MPs said today.

By The Newsroom

Published 20th Apr 2011, 07:00 BST

The Treasury lacked effective sanctions against Royal Bank of Scotland and Lloyds when business lending fell short by £30 billion, a report from the Public Accounts Committee (PAC) revealed.

The Treasury looked at various sanctions but decided each had a downside which outweighed the benefits, the report said.

The PAC said this was “not satisfactory” and the department should consider appropriate sanctions.

The PAC report was looking at the Treasury’s Asset Protection Scheme, launched in January 2009 to protect RBS and Lloyds, which are 84 per cent and 43 per cent taxpayer-owned following massive state bailouts.

The PAC report also said RBS was still vulnerable if another severe economic downturn occurred.