* Move should encourage competition - Treasury Secretary
* Data will enable government to see where action required
By Matt Scuffham
LONDON, July 23 (Reuters) - Britain's biggest banks haveagreed to release data showing how much they lend at a locallevel, the government said, enabling it to see how banks areserving the wider economy and in what areas of Britain there isa lack of lending.
The Treasury said seven of the country's largest lenders,which together account for around 80 percent of all loans, willfrom next year publish how much they lend to businesses andindividuals in 10,000 localities within the UK.
"It is a major step forward in terms of transparency andshould encourage competition by helping smaller lenders toidentify gaps in the market," Danny Alexander, Chief Secretaryto the Treasury, said on Wednesday.
Britain is keen to encourage new lenders to step in withestablished banks focused on shrinking their balance sheets andbuilding up capital reserves while the government's flagship'Funding for Lending' scheme has so far failed to achieve itsobjective with recent data showing a decline in net lending.
Royal Bank of Scotland, Lloyds Banking Group L>, HSBC, Barclays, Santander UK, Nationwide, and Yorkshire and ClydesdaleBanks will provide the data, which will be published bythe British Bankers Association and the Council of MortgageLenders on a quarterly basis. It will record loans andoverdrafts to small businesses, residential mortgages andunsecured personal loans.
On Monday the British Bankers Association released lendingdata for 120 regions within the UK. It showed total borrowing bysmall businesses in Britain stood at 100 billion pounds ($154 billion) at the end of last year and that businesses' depositsexceeded their borrowing in all regions except Wales and thesouthwest of England.