UK PROSECUTORS are looking into allegations that the nation’s banks abused government programmes aimed at encouraging lending to small businesses, according to a person with knowledge of the matter.

The Serious Fraud Office (sfo) had not yet announced a formal investigation, said the person, who asked not to be identified because the details were not public. The SFO was monitoring developments, said a spokesman in London.

British lenders have tightened their internal controls following a series of scandals including the rigging of benchmark interest rates and mis-selling of insurance on consumer loans. Lloyds Banking Group agreed last month to pay £7.8 million (R137.8m) in redress to the Bank of England after traders cut the fees banks paid for an aid programme of which Lloyds was one of the biggest beneficiaries.

The SFO was reviewing use of the government programme, the Enterprise Finance Guarantee, and its predecessor the Small Firms Loan Guarantees Scheme, set up to help boost lending to small businesses, said the person, adding that the prosecutor was looking at claims lenders might have used the programme to pass on riskier small business loans to the taxpayer, among other allegations.

Barclays declined to comment. Lloyds, Royal Bank of Scotland, HSBC, the British Bankers’ Association and the Federation of Small Businesses did not immediately return calls seeking comment. – Bloomberg