"Financing projects from £50,000 to £100 million"

Bank of England warns Nationwide about SME lending plans

Bank of England warns Nationwide about SME lending plans

The Bank of England has insisted that demands for the Nationwide to boost its capital should not affect the mutual’s lending programme.

The UK’s largest building society has delayed the launch of its SME lending operation until 2016, as it attempts to make up its capital shortfall.

Nationwide and Barclays are the two major lenders to have fallen short of new rules, which require banks to hold a leverage ratio of 3%.

The Bank of England recently accelerated its timescale for the banks to reach this requirement, which has prompted the two lenders to review their position.

The two institutions are among the most proactive conduits for the Funding for Lending Scheme, which was launched in August last year to boost lending to households and businesses.

But the Bank has forbidden lenders to adjust their lending plans, despite warnings from Barclays boss Antony Jenkins and Nationwide chief Graham Beale that lending might be constrained to meet the requirements by the new timescale.

Nationwide has recently made an offer to investors to buy back up to £715 million of permanent interest bearing shares in an attempt to strengthen its capital base, though it denied that it was prompted by the city regulator.

The society said that it was committed to lending to small businesses, but that it would not be pressured into manipulating the timescale.

“We have previously said that it is our strategic intention to enter the SME banking market,” a spokesman said.

“We will do this at the right time for the society and our members. That remains our intention.”

The delay will be a blow to the government’s hopes that lenders would increase lending to small businesses.

The Funding for Lending Scheme has proved a successful catalyst for the residential mortgage market, but many small businesses remain starved of credit from mainstream lenders.

The Co-operative Bank has already withdrawn from the commercial lending market this year to address its capital shortfall (read more). The Bank of England will be keen to ensure that more major lenders do not curb their lending, which could dampen the momentum of growth that has steadily built during 2013.

Wednesday, 28 August 2013 12:32
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