RBS to announce independent review into its failure to lend to small firms

Royal Bank of Scotland today announces an independent review into its lending to small firms. It will be led by Sir Andrew Large, a former deputy governor of the Bank of England, who will work with the management consultancy Oliver Wyman.

RBS, 81 per cent owned by the taxpayer, said the review will "identify steps" that can be taken to support lending to small firms. The review, which will report in the autumn, is also designed to promote a "common understanding" of the way the bank makes decisions on whether to lend.

"If there are loans that we could and should be making, but are not, then that will change. If there are things we can do better, we will" said Chris Sullivan, RBS's head of UK corporate banking.

Since the financial crisis broke in 2008, RBS has been continuously lambasted for refusing loan and overdraft requests from small firms. Net new lending to small and medium-sized enterprises (SMEs) by UK banks has been negative for much of the past five years, despite a host of official programmes designed to support the flow of credit to SMEs.

John Allan, of the Federation of Small Businesses, described the RBS review as a "positive step in getting to the root of the problem" and urged small firms to tell the inquiry about their experiences of banking with RBS.

Last month, the Chancellor announced a separate review into whether RBS should be split into a good and a bad bank. This review, which is expected to be conducted by Rothschild, will report in September.

In a sign of the ongoing troubles in RBS, the lender announced yesterday that its subsidiary, Ulster Bank, will close 39 branches across Ireland by the end of 2014. The consolidation plans could ultimately result in the loss of some 1,800 jobs.

Separately, at the Treasury Select Committee yesterday, Bank of England officials delivered a rebuke to banks that have been lobbying ministers to water down regulation of the sector. "Of course it's unacceptable, it's also pointless" said Paul Tucker, the Bank's Deputy Governor. Andrew Bailey, head of the Bank's Prudential Regulation Authority, said he had not personally been approached by ministers to dilute demands, but added: "These conversations did take place."

Robert Jenkins, a former member of the Financial Policy Committee, has cast doubt on the favoured strategy of Mark Carney, the Bank's new Governor, to provide markets with "forward guidance" on monetary policy. "[It] could be consistent and credible when the economic challenge was clear and compelling. How can it possibly be as effective... on the bumpy road back?" he writes in The Independent.