U.K. Treasury Chief George Osborne said that banks like Lloyds Banking Group PLC (LON: LLOY), the Royal Bank of Scotland (LON: RBS) and others must increase lending to businesses rather than boosting bonuses and dividends now that they have weathered the worst of the financial crisis.
Osborne told the Sunday Telegraph newspaper that banks, including Lloyds and RBS, “have an economic obligation to assist” small and mid-sized businesses in getting financing.
U.K. banking institutions have received billions in British taxpayers money as a result of the 2008 credit crunch. Economic data released this week are expected to confirm that Britain’s major institutions have returned to profit after two years of economic turmoil which led banks to dramatically cut lending.
Osborne said that many businesses in Britain are having trouble getting credit. “The danger is that, particularly next year, when there is a huge amount of refinancing required, that the small and medium-sized businesses suffer from a lack of access to working capital,” he said.
Osborne said British banks “are in no doubt that the government wants to see reasonable access to credit on reasonable terms in the small to medium-sized business sector.”
He added that banks should avoid increasing bonuses and dividends and instead spend their money on lending, commenting “if you maintain the remuneration and dividend levels of what they were a year or two ago then that would allow additional borrowing capacity.”
