FT.com / Companies / Banks - RBS and Lloyds loan levels probed.
The government is probing whether Royal Bank of Scotland and Lloyds are failing to meet officially mandated lending targets by deliberately pricing loans to small and medium-sized businesses at artificially high levels.
“We don’t want them to make uneconomic loans but our research suggests they may be pricing credit at unrealistic levels,” said one person close to the government. In a sign Whitehall is tightening the screws on the two banks it part owns, the government has been scrutinising the banks’ loan pricing mechanisms over the past two weeks.
“They are giving us a bloody hard time,” said one banker.
These things to say:
a) I suspect this is happening
b) It shows why passive ownership is the wrong model for these banks
c) It shows why they should not be returned to full private ownership but be forced to come into line under state ownership
d) This blows apart the theory that companies act in the interests of their shareholders: here they are specifically acting against them
e) This is why the directors of UKFI need to be changed - bankers can't deliver the required changes
f) This is why we need a new 'People's Bank'
To put it another way: the banking model remains broken and unfit for purpose. When will we learn that, and take action?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Given the current economic scenario it would be reasonable to assume that risk would become more expensive – or to put it another way, commercial loans are now more expensive. Its the government that does not understand this. Good to see Brown sticking to his promise not to get involved in commercial decisions – sigh.