Banks should 'tap into EU funds'

Banks should consider taking advantage of £4bn of European funding to make credit more accessible to businesses, the finance secretary has said.

John Swinney made the call in a letter to the four major banks north of the border - the Royal Bank of Scotland, HBOS, Lloyds TSB and the Clydesdale.

He said he had consistently heard about problems firms had in getting finance.

Gordon Brown has already said European Investment Bank (EIB) cash could make a impact to firms if passed on by banks.

Both the prime minister and the chancellor Alistair Darling said the money from the EIB could make a significant difference if it was passed on as loans to struggling companies.

'Pressing problems'

In his letter, Mr Swinney said: "I recognise that it is for each individual lender to decide whether the EIB facility adds value, but I would urge you to consider this option.

"Small and medium sized businesses are consistently telling me that access to finance is one of the biggest challenges they face in current climate."

He said he accepted that worldwide conditions were creating "new, unforeseen and pressing problems for banks".

"But if we are to ensure companies are not just able to survive the downturn, but to grow and help our economy emerge stronger than it was before, then we all need to work together," he added.

"That is why I have written to the four major clearing banks here in Scotland to urge them to explore all possible ways they can help businesses.

"In particular I hope they grasp the substantial opportunities provided by the resources made available by the European Investment Bank to assist the banks with SME (Small and Medium Enterprise) lending, and pass the benefits on to their customers."