Royal Bank of Scotland and Lloyds under investigation for setting artificially high loan prices

The government is probing Royal Bank of Scotland and Lloyds because it believes they are failing to meet lending targets for small and medium-sized businesses, according to reports. Official believe that the banks, in which the government is the biggest shareholder, are pricing loans at artificially high levels.

In March, the banks agreed to lend 拢39bn more to companies and customers than they would otherwise have done. The agreement was a condition of their entering the government鈥檚 asset protection scheme, which insures them against losses from their toxic assets.

While the pair say they will beat mortgage targets, they say they are unlikely to meet the two targets for corporate lending - 拢11bn for Lloyds and 拢16bn for RBS. In the six months to the end of June, Lloyds鈥� corporate lending contracted by 拢18bn, while RBS鈥檚 fell 拢7bn.

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