Latest FLS data shows RBS reducing SME lending

According to the BoE data, 74 per cent state-owned RBS recouped £266 million more than it lent out to smaller firms under the programme in the three months to June.

That is despite participants in the FLS scheme increasing net lending to SMEs by £0.5bn in total in the latest quarter.

The Funding for Lending Scheme was launched by the Bank of England in 2012 to help kick-start lending by providing banks with access to cheap money, increasing its focus on business lending in 2014.

But the new figures, which show that the Edinburgh-based lender has reduced lending to SMEs under the scheme in all bar one of the last six quarters, amounting to a cut in lending to SMEs by about £2 billion over the 18-month period, will raise fresh concerns that it is not doing enough to support SMEs.

There may be fears that RBS’s lending to SMEs is being squeezed as part of the bank’s plans to shrink its balance sheet and cut costs.

The scrutiny is likely to become more even more intense after the Bank of England said there had been an improvement in credit conditions over the past few years, meaning substantial falls in bank funding costs since the launch of the FLS scheme.

In contrast to RBS’s lending fall, fellow Edinburgh bank, Lloyds Banking Group, owner of Bank of Scotland, lent £527m net of repayments in the latest quarter taking the total advanced in the 18 months to June 2015 to £2.2bn.

The Bank of England data also showed that only the Nationwide Building Society cut lending to SMEs at a rate higher than RBS, at £279m over the latest quarter.

A Royal Bank spokeswoman said it has been playing its part in the economic recovery, exceeding the £9bn target set for new SME lending in 2014 (by £1.3bn) as the biggest lender to British business.

She said RBS provided services to more than 100,000 start-ups in 2014, up six per cent on 2013. It has proactively contacted about 350,000 SME customers to offer more than £12.5bn new lending.