Lending low as anger at banks reaches new heights

Scottish Engineering, a lobby group representing over 400 firms, has issued a strong reprimand to banks over both high arrangement fees and overdraft rates.

The statement was prompted by a large number of complaints from top executives of member companies who thought they were in a suitable financial situation to receive certain loans, yet felt lending institutions imposed intrusive and unnecessary administrative procedures on them.

Chief Executive Dr Peter Hughes said in a statement on the company's website: "Bank officials are also perceived as interfering with the running of businesses. Even companies with strong order books and a reasonable cash situation are being asked for written summaries on business practices, future plans and other operation issues, which are totally inappropriate."

The sentiments of Scottish Engineering firms represent a general trend of dissatisfaction with the Bank of Scotland, shown in figures released by the Financial Ombudsman Service in the last week of February.

The figures show that, in the latter half of 2009, the Lloyds Banking Group—which includes the Bank of Scotland—attracted the largest number of complaints out of all financial firms; almost double those concerning the second on the list, Barclays.

The complaint statistics were released on the same day the Royal Bank of Scotland admitted, in the organisation’s Annual Results 2009 report, it had failed to meet the £16 billion lending target set by the government. This embodies the difference perceived by business groups between the rhetoric of political and banking leaders, and the situation met with in reality.

In the report, Philip Hampton, the bank’s chairman, cited “withdrawal of foreign lenders [being] less pronounced than anticipated”, customers being, “strongly focused on reducing their borrowings,” and demand being weakened by, “the teeth of the recession,” as reasons for the failure to meet the government target.

Robert Peston, Business Editor for the BBC, rejected many of the justifications given by Hampton, on his blog. He criticised the bank for blaming businesses for not moving to borrow enough, through presenting the fact that “there has been a £12.2 billion reduction to £151 billion during the course of the year in the total volume of loans provided by Royal Bank to companies”.

One group that has not been offered the funding it desires is the Lloyds TSB Foundation for Scotland, which has had recent notice the Lloyds Banking Group will cease its funding. Mark Lazarowicz MP expressed his concern at the development in a letter to Alistair Darling, Chancellor of the Exchequer.

Mr Lazarowicz said that the Banking Group should “show the same generosity to those who depend on the foundation that Lloyds TSB received from taxpayers when it hit trouble itself”.