Bank bosses head 'lending taskforce' to aid private sector

The bosses of six major British banks are to form a taskforce to increase lending to businesses, the British Bankers' Association said today.

In a letter to Chancellor George Osborne, BBA chairman Stephen Green, who is also chairman of HSBC, outlined a series of proposals to stimulate private sector recovery.

He said chief executives of the country's top banks, including Barclays, Lloyds Banking Group and Royal Bank of Scotland, will guide working groups that will assess the lack of lending to businesses and propose solutions.

"We, like you, believe there is a real need to make sure that viable businesses are able to obtain the finance they need to support the recovery of the UK economy," Green wrote.

"The objective of the taskforce is to explore the problems currently affecting securitisation markets... and to explore other issues that will influence the ability of UK businesses to obtain the finance they need to support private sector growth.

"We agree with you the essential importance of ensuring that credit is available to viable businesses and particularly for the recovery."

BBA chief executive Angela Knight hit back at criticism that banks were starving firms of money.

She told BBC Radio 4's Today programme: "We have a situation in which, right now, all the numbers show that there is continuing good provision of finance to business; at the same time, business has overwhelmingly paid back its debts."

She added that the taskforce would look to address "pinch points" in the system as recovery and the demand for working capital gradually takes hold.

The groups will made up of representatives of the banks and members from the Treasury, Department for Business, Innovation and Skills and the Bank of England. They will report to Osborne with the results in October.

Osborne urged the banks in a newspaper interview last week to use strong first-half profits to boost business lending rather than pay large bonuses.

The BoE lent British banks almost £200 billion during the height of the financial crisis in 2008. If banks reduce lending to businesses in order to make repayments it could derail the private sector economic recovery just as sharp public sector cuts start to bite.