Nov 18 2008
The banks, which control almost 90pc of the £53bn market, will disclose to the Government how much money they make available to small firms, their assessment of the risk attached to that lending and how much it costs them to raise the funds.
The surprise intervention mirrors the policeman role given to the Bank of England following the mass withdrawal of credit to small firms during the 1990s recession.
Lord Mandelson, the Business Secretary, said the Government had to establish whether banks were consciously withdrawing credit, repricing existing facilities and acting "in a rather arbitrary way" or whether the problems experienced by small firms on the ground were down to a failure of communication between banks, their branch staff and their customers.
Speaking after the first meeting of the Government's new Small Business Finance Forum, he said the five banks - HSBC, Barclays, Lloyds TSB, Royal Bank of Scotland (NatWest) and Halifax Bank of Scotland - would hand over the market sensitive data "rapidly" to enable officials to present findings to the forum when it meets again next month.
Lord Mandelson said Government would make clear to the banks what it considered "reasonable and unreasonable behaviour".
"[We want to] establish what is going on, on the ground, whether the funds are available as they claim, whether the lending facilities are being maintained or extended at reasonable cost," he said.
The Business Secretary said the 'no nonsense' approach to the banks showed that the Government was making progress in resolving the credit issues faced by small businesses.
Small business trade bodies welcomed the intervention but said the Government had to offer immediate assistance to help small firms.
"The downturn is affecting our members in real time, while the Government today almost looked like it was working in slow motion," said the Federation of Small Businesses' Andrew Cave.
"But it is good that they have got a commitment from the banks that they will disclose this information. It will give the Government the chance to see the facts rather than the rhetoric."
He added: "There's a huge amount of distrust on both sides. Branch managers are scared about the implications of dishing out loans and small businesses are scared about going to talk to their bank manager."
The banks, through the British Bankers' Association, have also agreed to rewrite their voluntary code of conduct towards their small business customers for the second time this year.
Angela Knight, the BBA chief executive, said the new "statement of principles" would strengthen the banks' commitment to maintain a "relationship" with their customers, including providing new small business helplines to counter what she said were "real fears" about contacting banks for advice.
"We are looking at a different future. The key thing is for the finance to be available for the right business plans. We need facts in this area and not emotions," she said.
Source: http://www.telegraph.co.uk/finance/yourbusiness/
