Article taken from: www.ft.com
Treasury rejects calls to reform UK laws on business loans Treasury rejects calls to reform UK laws on business loans Posted on by wLw
The UK government has rejected calls to reform business lending laws, despite a series of high-profile scandals in the sector, including at Lloyds-HBOS and Royal Bank of Scotland.
The decision was attacked by MPs and campaign groups, who accused the government of “betraying British businesses”.
Lending to small and medium-sized businesses is largely unregulated, but the Treasury said the financial services industry had “changed significantly” since the aftermath of the financial crisis, when most of the highest-profile mistreatment occurred.
It added that bringing SME lending into regulation would increase costs for businesses and damage competition in the market.
The comments were published by the Treasury select committee on Thursday. Nicky Morgan, who chairs the committee, said that “if the government continues to bury its head in the sand, scandalous events such as those at RBS’s [Global Restructuring Group] could re-occur”.
An independent review found “widespread and systematic” mistreatment of customers in RBS’s restructuring unit. However, the bank escaped punishment from the Financial Conduct Authority last year, with the regulator remarking that the failures “might ordinarily trigger disciplinary action if they occurred in a regulated business”.
The FCA said it would widen access for small businesses to make complaints to the Financial Ombudsman Service, but the Treasury select committee and all-party parliamentary group on fair business banking have called for stronger measures including direct regulation and the creation of an independent tribunal system.
“There is cross-party support to provide enhanced protections and improved access to justice for SMEs, so it’s disappointing that the government will not pursue our recommendations”, Ms Morgan added.
Mid-sized banks TSB and Metro Bank have also supported the calls for a tribunal, but a review commissioned by industry group UK Finance argued it would be more expensive and less effective than expanding the ombudsman’s remit. Recommended
Nikki Turner, director of the SME Alliance, which campaigns on behalf of businesses that were mistreated by banks, accused the government and FCA of “betraying British businesses, while acknowledging they are the backbone of this country, because they are unwilling to take on the big banks”.
Ms Turner pointed to the example of Ireland, where the central bank started regulating SME lending in 2016 without damaging lending levels.
“The idea that because the banks are not behaving as badly as they did a decade ago, it’s all OK, is like inviting Hannibal Lecter to dinner because he hasn’t killed anyone recently,” she added, referring to the cannibalistic Silence of the Lambs character.