Six largest banks of the UK, as agreed upon by their respective chief officers, are set to form a Task Force for the examination of business lending with the aim of counteracting the previously pronounced criticism about their “insufficient supply of credit” that could consequently help in the economic recovery. This is after the public pronouncement of Bank of England Governor Mervyn King about his so-called observation on the “access to credit” in UK banks. This is even followed suit by more criticisms from politicians and some business groups.
The task force will delve into other means on how banks can provide more funding for business. Such action is expected to yield a more transparent status of the banks’ credit and lending policies as well as status as the task force aims to report its findings by early October. This is presented by Stephen Green, who is both chairman of London-based HSBC Holdings Plc and the British Bankers’ Association in his letter to U.K. Chancellor of the Exchequer George Osborne.
He understands that some air must be cleared and that there is indeed importance in ensuring that credit be available to viable businesses. This too is for the economic recovery’s sake. Green added in his letter that “A variety of factors have an impact on this, and we recognize the collective role we have to play.” From the time that criticisms from politicians and business groups have come out with regards to their so-called failure to boost credit after they have received government bailouts and guarantees, banks have been on their toes defending themselves and proving their critics wrong.
A business lobby group, the Institute of directors, in their report showed that one-third of the British firms that actually applied for credit last year (in the first six months) were rejected. Based on this report King gave it an even deeper implication of the fact that there is indeed a problem with the way banks are treating small and medium sized businesses.
In the case of Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc failing to meet lending targets that have been agreed with the government last year in return for taxpayer-funded rescues, they justified it to be due to the fact that this is a result of a drop in demand from borrowers themselves. This is but a normal consequence of the recession. In response to several criticisms, Lloyds CEO Eric Daniels said that it was not due to their turning away from customers but rather the lack of demand where businesses don’t want to take the risk with debt.
The task force will comprise of the CEOs of RBS, Lloyds, Barclays Plc, Santander U.K., Standard Chartered Plc and HSBC a the steering group and will work with the U.K. Treasury, the Bank of England and the Department for Business, Innovation and Skills.
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