BRITAIN’S biggest lender to small firms has announced a major review of its lending procedures amid growing concerns over a shortage of finance to small business – a sector seen as vital to economic revival.

 

Royal Bank of Scotland, which is 81 per cent owned by the taxpayer, announced the move after coming under increasing political pressure to lend more to small firms.

 

The bank said it had appointed former Bank of England deputy governor Andrew Large and management consultants Oliver Wyman to conduct the review.

It said the study would focus on what steps it could take to support small businesses and Britain's economic recovery while maintaining sound practices.

 

Britain's government and central bank are concerned that poor access to finance for smaller firms may thwart a sustainable recovery from the country's worst slump in decades.

 

 

Business lending has fallen despite the government's flagship Funding for Lending scheme, which gives banks cheap funding to encourage them to offer credit.

 

Banks say they must balance demand to lend against the need to avoid the kind of reckless lending which resulted in Britain having to pump a combined 66 billion pounds into RBS and Lloyds during the 2008 financial crisis.

 

Lending to smaller firms dropped by 452 million pounds in May and deputy governor of the Bank of England, Andrew Bailey, told MPs the desire of British banks to offer credit was still in question.

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