Banks look to farm out SME lending

City banks must draw up 'resolution plans' by mid-year.

Several large European banks are weighing the idea of outsourcing a portion of their core small business lending to a new crop of loan funds, in a further sign of the growth of the shadow banking industry in Europe.

A number of banks including UBS and Royal Bank of Scotland have discussed with specialised loan funds how banks might give those funds access to their corporate client bases, said several senior bankers.

The initiative comes as concern grows over the likelihood of sharp deleveraging across the European banking sector. The International Monetary Fund predicted last month that banks would shed 2tn of assets over the next 18 months, potentially damaging a fragile Eurozone recovery ... READ MORE

Released by the Financial Times - 3 May 2012