Banks creating ‘needlessly tougher’ circumstances for small businesses

In its report on access to banking services for smaller firms, MPs on the committee condemn the unfair debanking of legitimate businesses and substandard processes for resolving disputes between SMEs and banks.

They are also calling on the Prudential Regulation Authority not to go ahead with plans to scrap the SME supporting factor in the new Basel 3.1 standards because it could lead to British small businesses falling behind their European and American competitors.

In response to the report, Andrew Martin, CEO and Founder of SMEB, a financial technology company dedicated to supporting small business, said: “High street banks every day show their disinterest for SMEs through their behaviour.

The numbers speak for themselves – hundreds of thousands of businesses de-banked – often with little or no notice. Whole sectors of the economy are blocked off under increasingly draconian policies.

“Today’s report shows how systematic failures in the banking system are threatening to strangle the engine of our economy. More needs to be done to stand up for SME’s and ensure fair access to finance.

“The government should introduce a barometer to measure lending success, and cap the commercial agreement in the same way they did for the subprime sector.”

Chair of the Treasury Committee, Dame Harriett Baldwin, said: “There’s no hiding from the fact smaller firms have had a torrid time over the last few years.

“Unfortunately, what we have found over the course of the inquiry is that there are some instances where banks and regulators are making a tough world for small businesses needlessly tougher.

“Banks and regulators can’t wave a magic wand and solve all of the problems facing small businesses in this country, but they can certainly do more than they currently are. I hope banks, the regulators and the Treasury take careful note of what we’ve uncovered.”

Emma Lovell, chief executive of the Lending Standards Board (LSB), Lending Standards Board: the self-regulatory body responsible for the business Standards, said: “There is scope for lenders to improve their processes and controls in relation to personal guarantees.

“These issues were highlighted in our review of the Standards of Lending Practice for business customers earlier this year, and we are already in the process of updating our guidance on personal guarantees so that SMEs can be sure of fair treatment. The new guidance will be published in the summer.

“The business Standards are the only lending protections of their kind for UK SMEs. As the committee has outlined, the FCA’s ability to act in this area is limited by its regulatory perimeter; the business Standards extend protections to SMEs beyond this.

“SMEs should always check their finance provider is registered with the LSB to ensure they benefit from the highest standards of protection.”