When will Lloyds and Royal Bank of Scotland increase lending?

The revelation that both Lloyds Bank and Royal Bank of Scotland will miss legally binding lending targets signed some months ago has upset many people in the UK. These are banks which were bailed out to the tune of tens of billions of pounds by UK taxpayers although at the moment appear unable or unwilling to "give back". So when will Lloyds Bank and Royal Bank of Scotland increase lending to consumers and businesses?

The reality is that on one hand the UK government is asking banks to refrain from taking undue risk while on the other hand pressuring the likes of Lloyds Bank and Royal Bank of Scotland to increase their lending. This comes amid signs of a fallback in the UK retail market and the potential of a double dip recession moving ever closer. We also need to appreciate that both Lloyds and Royal Bank of Scotland are going through a substantial reorganisation of their operations which will see many subsidiaries and a number of high street outlets sold off in the short term.

Against this background of uncertainty and ongoing change it is no surprise to see that lending targets will be missed although hopefully these should improve in the second quarter of 2010. This is all assuming that the UK economy stays strong and starts to move ahead!