| Lloyds Banking Group downgraded, feels heat over lending |
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| UK Economic | |
| Written by Will Peters | |
| Tuesday, 09 March 2010 11:37 | |
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Pressure is being placed on the state lenders to get their act together over SME lending. Lloyds Banking Group (LON:LLOY) has received a ratings downgrade from the research team at Barclays Capital. Barclays have set a new price target of 53 on the shares - this is however only 1.21% lower than yesterday's close. The downgrade comes as Lloyds Banking Group and RBS (LON:RBS) feel the pressure over their lending practices to SMEs. Vince Cable, the Liberal Democrat Treasury spokesman, used a major speech in Edinburgh last night to bring pressure on the banks who are effectively based in Scotland. Cable simultaneously attacked the bonus culture at the two banks suggesting that resources should be re-channelled away from remuneration towards increasing lending to SMEs. Cable did not stop there: RBS and Lloyds Banking Group should also be broken up to increase competition on the high street and protect taxpayers against huge institutions failing. In a speech to Reform Scotland, a think tank, in Edinburgh, Cable pointed out the debts run up by RBS and Halifax Bank of Scotland were 25 times the size of Scotland’s economy when they collapsed. Breaking up RBS and Lloyds Banking Group would “help protect us against banks that are too big to fail,” argued. While the calls on the banks to increase lending to SMEs is welcome, the mechanisms to promote such practices, by cutting back on bonuses, is unfortunately flawed. The issue of bonus payments and executive pay at all UK banks has been well publicised and many politicians have sought mileage on the issue. But meddling with the banks at such a micro level has ultimately proven undesirable. An RBS spokesman said the bank had “noted” the committee’s conclusions but insisted it is “committed to supporting our customers during this difficult economic time.” He added: “We share the public’s concern and understand that some historic pay practises are impossible to defend. Reform is needed and we have led the way in ensuring rewards are better aligned to long-term shareholder value.” But he argued it would be “irresponsible” to jeopardise the bank’s stability, and £45 billion of taxpayers’ money, by acting unilaterally on the issue. As Scotland’s largest financial services employer, Lloyds Banking Group said it was aware of the responsibility it has to its customers and the country’s economy. A spokesman said: “We have a number of measures and procedures in place to make sure that the products we offer suit individual customer needs and are provided in an appropriate manner.” 
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| Last Updated ( Tuesday, 09 March 2010 11:44 ) |