Banks deny lack of credit for firms

BRITAIN'S high street bankers today denied they were harming small businesses and said it was a lack of consumer demand that was killing firms.

Chiefs at Barclays, Lloyds TSB and RBS told MPs that far from imposing high lending rates, they were losing money by passing on base rate cuts.

The banks told the Business, Enterprise and Regulatory Reform Select Committee they now had to borrow money at the Libor rate, and lend at the lower Bank of England bank rate.

Labour MP Lindsay Hoyle said that it was unacceptable that the banks were now effectively saying that "the ones who need help most are the ones who will get least help".

All of the banks said small firms were suffering much more from a fall in demand caused by consumer fears of the downturn than by a lack of credit. They also claimed their lending levels were at or above those last year.

RBS small businesses chairman Peter Ibbetson said banks could only lend to firms if they believed they would get the money back. "I suspect some of the anecdotes you have seen are from those who don't like the response we give," he told MPs.