Leading Barclays' boss rejects lending targets plan

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A leading Barclays' boss today rejected Government plans to impose targets for lending to small businesses.

Despite ministers' fears that a drought in credit is threatening the economic recovery, Steve Cooper, head of Barclays' small business division, said he would not want to comply with lending targets.

Mr Cooper told the Financial Times: "I'm not going to sign up to a target. I don't want to create an expectation that if Barclays said no yesterday it could say yes tomorrow (because it has a target to achieve)."

Barclays' part-nationalised rivals Lloyds Banking Group and Royal Bank of Scotland have agreed to lending targets - but last month business secretary Vince Cable unveiled plans to widen these agreements to other UK banks.

The government wants banks, which have racked up £15 billion in half-year profits, to use their gains to increase the flow of credit rather than handing out bumper bonuses and dividends.

But the banks believe the problem is one of demand for credit, not supply, and Mr Cooper's dismissal of the proposed lending targets follows a similar rejection from HSBC earlier in the month.

Mr Cooper's comments may fuel the political furore surrounding the banking industry's support for small business, as pressure mounts to boost lending.

According to the Bank of England's most recent Trends in Lending report, overall lending to businesses contracted by £2.3 billion in May - more than double the £1.1 billion slide seen in April.

Lending to private firms was down 4.4% year-on-year in June, the Bank's figures say - in contrast with the pre-credit crunch era when it was growing at an annual rate of almost 20%.

The British Bankers' Association (BBA) attributed the trend to falling demand as companies attempted to reduce debts - but many business lobby groups have blamed the lack of demand on the rising price of credit.

Mr Cooper, who oversees lending to 750,000 small and medium-sized companies, also defended charging more for corporate loans.

He said the banks had to price more cautiously for risk.

"There has been a real shift in risk profile, which is reflected in the price," he said.

Mr Cooper told the FT that while the majority of small businesses paid 5% or less for credit, some loan rates hit as high as 19.9%. This might typically be offered to those businesses with a poor credit record and without security for the loan.

Last week a new taskforce was set up by the British Bankers' Association to assess credit demand from small firms and to put forward recommendations to aid recovery. The group will report its initial findings to Chancellor George Osborne in early October.