Bank Lending Taskforce Announces Action Plan

The British Banking Association (BBA) has issued an action plan to tackle bank lending to businesses, via a new taskforce of banks, Government and the Bank of England.

In a letter to the Chancellor, George Osborne, the BBA has proposed a series of meetings to address the challenges faced by both banks and small businesses. The bank lending taskforce will report back to the Chancellor in the autumn.

Banks have faced criticism from business groups for failing to lend enough to small businesses. New figures from the BBA show that although lending increased between May and June 2010, it fell between June 2009 and June 2010.

Complaints to the Financial Ombudsman by SMEs more than doubled in the year to 31 March 2010, compared to the previous year, reaching a total of 496.

“The industry taskforce will look at how best we can help rebuild the economy and will particularly consider how to help our business customers access finance,”

said BBA chief executive, Angela Knight.

“When the work is further advanced, we will discuss the findings with business groups to get their take on our proposals, and report back to the Chancellor in the autumn.”

Forum of Private Business spokesman, Phil McCabe, warned that the bank lending taskforce must do more than just discuss the issues.

“It must be more than a talking shop, and there must be definitive findings and real actions to follow it up. You only have to look at the BBA’s recent figures to see that lending is down significantly year on year, and that is what needs to be addressed.”

ACCA’s senior policy adviser, Manos Schizas, said that the taskforce needed to focus on the right issues.

“There is some merit in the banks’ view that the reason lending has fallen is that banks have less liquidity and there is less demand from businesses. However, there is also a lot of ‘discouraged demand’, which means firms don’t apply for lending because they think the terms will be disadvantageous or they’ll be turned down.”

“If the taskforce focuses on addressing discouraged demand or making firms aware of their finance options, we could see better results. Having a debate about how poorly the banks treat small businesses isn’t going to help. Banks should communicate to businesses what information they need to show them in order to get lending.”

Bank Lending Taskforce Announces Action Plan

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