Nationwide delay SME lending plan

Plans to boost credit to small businesses have been dealt a blow after a major lender delayed its launch into the sector until 2016.

Nationwide, the UK's biggest building society, has put on hold plans to lend to small and medium-sized enterprises (SMEs) as regulators force it to hold more capital as a buffer against financial crises, the Financial Times reported.

The mutual, which had planned to begin lending to small businesses this year, faces demands to bolster its leverage ratio - which measures its capital as a percentage of its assets - to 3% by the end of 2015.

Nationwide's delay will be a blow to Government plans to unblock the credit logjam to small firms, seen as vital to speeding up economic recovery.

Nationwide revealed plans to enter the SME loans market last year, where lending has shrunk as banks retreat and demand wanes. At the time boss Graham Beale described it as a "natural extension of what we can do".

But the Prudential Regulation Authority (PRA) recently demanded Nationwide draw up plans to plug a hole in its balance sheet by bolstering its leverage ratio.

Mr Beale criticised the measure as a "crude instrument which will be a constraint for low-risk lenders (and) too lenient for high-risk lenders".

Weeks later the building society was given vital breathing space by the regulator on meeting the tougher standard, when the PRA approved its capital-raising plans and gave it until the end of 2015 to increase its leverage ratio from 2%.

At the time Nationwide did not say how it will bolster its capital levels, but its plans do not involve raising extra funds from investors.

Nationwide is reportedly focusing on increasing its market share of current accounts instead.

The FT said the building society is now unlikely to launch a full SME service before 2016.

A spokesman said: "We have previously said that it is our strategic intention to enter the SME banking market and that we will do this at the right time for the society and our members. That remains our intention."