Nationwide steps back from SME loans Nationwide, the UK's largest building society, has delayed its launch into the small business banking market until 2016, dealing a blow to the government's efforts to boost lending to these customers. The mutual has put on hold its plans to start offering loans to small- and medium-sized enterprises as it battles to meet tougher capital requirements set out by the financial regulator earlier this year. Faced with demands to boost its leverage ratio - a measure that relates capital to overall loans - to 3 per cent by 2015, Nationwide has had to be more selective about how it invests in the business, according to people with knowledge of its plans. It has opted to focus on increasing its market share of current accounts - to a target 10 per cent, compared with the current 5.7 per cent - rather than funding a push into SME lending. Nationwide started developing plans to enter the SME market at the end of 2011, with a view to doing so this year. People familiar with its ambitions said the group was now unlikely to launch a full SME service before 2016 - after the deadline for meeting the new leverage ratio. The delay will come as a disappointment to the government, which has been trying to push the banks to lend more to small businesses. Last year George Osborne, the chancellor, told the Treasury select committee that Nationwide was considering entering the SME market, a move he said would increase competition. Nationwide said: "We have previously said that it is our strategic intention to enter the SME banking market and that we will do this at the right time for the Society and its members. This remains our intention going forward. The tougher capital demands are not the only factor in Nationwide's decision to postpone the SME launch. Graham Beale, chief executive, previously indicated that he wanted to improve the mutual's existing banking systems and infrastructure and boost its profitability before moving into this area. He also said he would only take such a step if market conditions were suitable. The delay could reignite tensions between the government and regulators over how best to foster the economic recovery. Last month Vince Cable, business secretary, accused the "capital Taliban" in the Bank of England of holding back the recovery by imposing excessive financial burdens on banks. His comments came after the Prudential Regulation Authority revealed that Nationwide would have to strengthen its capital position after it fell short of the required 3 per cent leverage ratio. Mr Beale warned that having to meet the new requirement quickly would constrain lending. Three weeks later the PRA agreed to give Nationwide until 2015 to meet the new rules, a deadline Mr Beale expects to hit by organic means - largely by retaining a greater share of earnings. Nationwide has benefited in recent months from a reduction in savings rates across the retail market, which has helped boost its profit margins.