Banks Gaining Monopoly on Lending, Warns FSB
High street banks could soon have a monopoly over lending to small businesses, the Federation of Small Businesses (FSB) has warned.
The business lobby group is concerned that recapitalisation, bank mergers and initiatives targeted at stimulating bank lending are stifling competition and choice for firms seeking finance.
“Business owners who are refused finance with a major lender have few alternative ways to secure credit,” said an FSB spokesman. “We want to see more alternative sources of finance provided locally, such as through post offices, financial intermediaries and Regional Development Agencies.
“Struggling banks should not be sold off to other high street lenders, as this would create massive institutions which would curb competition,” he added.
According to the FSB, a quarter of UK small firms are still struggling to access affordable finance.
“Despite Government bailouts and interest rates set at a record low, small firms are still finding it tough to access affordable loans and overdrafts from banks,” said FSB chairman, John Wright.
“This is compounded by the fact that much of the support provided by the Government is only available through the banks and often this isn’t replicated at branch level,” he added.
However, the British Banking Association opposed the FSB’s proposals, saying that there is no shortage of competition in the banking sector, and that lending levels to small firms remain healthy.
“We’re seeing lending to small businesses increase month on month,” said a BBA spokesman. “Our latest figures show that lending to small firms rose by £391 million in June and deposits and numbers of new business relationships continued to hold up.
“New entrants to the banking sector are always welcome,” he added. “The sector has always thrived on competition, with banks competing with each other, and that is likely to continue.”