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Banks fear 'debt UK’ backlash as extent of credit reliance laid bare
Figures to reveal more than £1 trillion lent by banks with figures to give stark picture of where levels of indebtedness are highest across UK.
"If Mr Osborne wants individuals to take saving seriously, he needs to do a great deal more" Photo: PA
By Kamal Ahmed
9:30PM GMT 14 Dec 2013
185 Comments
The full extent of Britain’s reliance on credit will be revealed this week with new figures expected to show that mortgages, personal loans and lending to small businesses totals £1.015 trillion.
The figures, to be released in a set of statistics on Tuesday by the Council of Mortgage Lenders (CML) and the British Banking Association (BBA), are expected to reveal that as of last June, mortgage lending stood at £885bn, lending to small and medium-sized enterprises (SMEs) at £100bn, and £30bn had been distributed as personal loans.
For the first time the figures will be broken down by 9,000 postcodes across the country, giving a stark picture of where levels of indebtedness are highest across the UK.
All the main high street banks, including the government-backed Royal Bank of Scotland and Lloyds Banking Group, will also publish their own figures on lending by postcode.
Senior banking sources are concerned that the figures will be used to argue that banks are not doing enough to support first-time buyers or SMEs in certain areas where figures for lending are revealed to be below the national average.
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In a regional breakdown released by the BBA last July, lending to SMEs was shown to be skewed towards the South East. A fifth went to businesses in London, and a further 13pc was provided for businesses in the South East. Just 7pc went to Scotland, the same percentage as for Yorkshire and Humber.
Sources said that the reason much of the money went to support SMEs in the South East was because there were many more businesses in that area.
“It is the raw data that is being published,” said one source. “SME lending is different across the country because the numbers are very different. But you can imagine local politicians leaping on the figures without looking at the context.”
There are similar problems with levels of mortgage lending, which are likely to show significant differences across the country. Some areas where incomes are low and reliance on benefits high will be revealed to have hardly any mortgage lending.
Banking sources are also concerned that the high street banks will be blamed for only supporting affluent areas.
“By its very nature, if an area has a high level of benefit claimants then [mortgage] lending will be low,” said a source. “That might in fact be sensible. but it could be twisted to mean something else.”
The City is concerned that the figures might be used to demand more regulation of the banking sector.
Sources said that the UK could look at introducing a British version of the US Community Reinvestment Act, which was brought in to force banks to lend to certain sectors of the community that appeared to be losing out on lending.
The powers of the act have been increased over time and were used by then President Bill Clinton to encourage mortgage lending to poorer parts of America.
“We ended up with sub-prime when it was followed to its natural conclusion,” one banking source said.
Banking officials said the push to produce figures showing lending by postcode came from the Liberal Democrats. It was endorsed by the business and energy minister, Michael Fallon.
“We need to publish bank lending [statistics],” Mr Fallon said in an interview with The Sunday Telegraph earlier this year. “I’ve done it already for the Enterprise Finance Guarantee scheme. [The banks] didn’t like that, they didn’t think I was serious that I wanted to see increased take up of the scheme.
“I now want to publish bank lending to small firms by area as, indeed, the new Archbishop of Canterbury, Justin Welby, recommended and we need to do that.
“And that needs to be separate from mortgages and personal loans. The information is there, it is held by the banks and it is held by the Bank of England. I think it ought to be out there in the public domain.”
Figures to reveal more than £1 trillion lent by banks with figures to give stark picture of where levels of indebtedness are highest across UK.
"If Mr Osborne wants individuals to take saving seriously, he needs to do a great deal more" Photo: PA By Kamal Ahmed
9:30PM GMT 14 Dec 2013
185 Comments The full extent of Britain’s reliance on credit will be revealed this week with new figures expected to show that mortgages, personal loans and lending to small businesses totals £1.015 trillion.
The figures, to be released in a set of statistics on Tuesday by the Council of Mortgage Lenders (CML) and the British Banking Association (BBA), are expected to reveal that as of last June, mortgage lending stood at £885bn, lending to small and medium-sized enterprises (SMEs) at £100bn, and £30bn had been distributed as personal loans.
For the first time the figures will be broken down by 9,000 postcodes across the country, giving a stark picture of where levels of indebtedness are highest across the UK.
All the main high street banks, including the government-backed Royal Bank of Scotland and Lloyds Banking Group, will also publish their own figures on lending by postcode.
Senior banking sources are concerned that the figures will be used to argue that banks are not doing enough to support first-time buyers or SMEs in certain areas where figures for lending are revealed to be below the national average.
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In a regional breakdown released by the BBA last July, lending to SMEs was shown to be skewed towards the South East. A fifth went to businesses in London, and a further 13pc was provided for businesses in the South East. Just 7pc went to Scotland, the same percentage as for Yorkshire and Humber.
Sources said that the reason much of the money went to support SMEs in the South East was because there were many more businesses in that area.
“It is the raw data that is being published,” said one source. “SME lending is different across the country because the numbers are very different. But you can imagine local politicians leaping on the figures without looking at the context.”
There are similar problems with levels of mortgage lending, which are likely to show significant differences across the country. Some areas where incomes are low and reliance on benefits high will be revealed to have hardly any mortgage lending.
Banking sources are also concerned that the high street banks will be blamed for only supporting affluent areas.
“By its very nature, if an area has a high level of benefit claimants then [mortgage] lending will be low,” said a source. “That might in fact be sensible. but it could be twisted to mean something else.”
The City is concerned that the figures might be used to demand more regulation of the banking sector.
Sources said that the UK could look at introducing a British version of the US Community Reinvestment Act, which was brought in to force banks to lend to certain sectors of the community that appeared to be losing out on lending.
The powers of the act have been increased over time and were used by then President Bill Clinton to encourage mortgage lending to poorer parts of America.
“We ended up with sub-prime when it was followed to its natural conclusion,” one banking source said.
Banking officials said the push to produce figures showing lending by postcode came from the Liberal Democrats. It was endorsed by the business and energy minister, Michael Fallon.
“We need to publish bank lending [statistics],” Mr Fallon said in an interview with The Sunday Telegraph earlier this year. “I’ve done it already for the Enterprise Finance Guarantee scheme. [The banks] didn’t like that, they didn’t think I was serious that I wanted to see increased take up of the scheme.
“I now want to publish bank lending to small firms by area as, indeed, the new Archbishop of Canterbury, Justin Welby, recommended and we need to do that.
“And that needs to be separate from mortgages and personal loans. The information is there, it is held by the banks and it is held by the Bank of England. I think it ought to be out there in the public domain.”