BANKS have been urged by the government to pass on the benefits of its emergency loan scheme to businesses during the coronavirus pandemic - as research found up to a million may soon have to close.
There has been criticism the banks, many of which were subject of the big financial crash bailout of 2008, were not providing the benefits expected from the Coronavirus Business Interruption Loans (CBILSS) announced by Chancellor Rishi Sunak two weeks ago.
That was set up so that businesses would be able to walk into bank branches and discuss getting up to £5m to help thm survive the lockdown.
The promise from the chancellor was that "any good business in financial difficulty who needs access to cash to pay their rent, the salaries of their employees, pay suppliers, or purchase stock, will be able to access a government-backed loan, on attractive terms".
But research from Accountancy group Corporate Finance Network, after analysing the government help on offer, said that 18% of their clients were unlikely to get access to the cash they will need to survive a four-week lockdown.
And on Wednesday, business secretary Alok Sharma said the banks have been told to pull their socks up.
The Chancellor has written to the chief executives of the UK banks, to "urge them" to ensure the benefits of the loan scheme are passed on to businesses and consumers.
Mr Sharma said: "It would be completely unacceptable if any banks were unfairly refusing funds to good businesses in financial difficulty.
"Just as the taxpayer stepped in to help the banks back in 2008, we will work with the banks to do whatever they can to repay that favour and support the businesses and the people of the United Kingdom in their time of need.
"Of course, this is a brand new scheme and as with all new schemes, it won't be perfect from the outset. We are listening all the time. And in response to concerns we have heard from businesses, we are looking at ways in which we can ensure they get the support they need.
"It is crucial that when we overcome this crisis, as in time we will, that businesses are in a good position to move forward. Times are tough, and we have harder times ahead of us, but I know that together we will pull through."
Rachel Reeves, the Labour MP who heads the business select committee, wrote to the chancellor on Tuesday outlining concerns with the schemes to support companies.
Those concerns included some banks’ use of personal guarantees in the form of savings and mortgages to secure lending to small businesses under the government’s hastily formulated business interruption loans scheme. She also said that some of the banks offering the government-backed loans were putting in place “punitive” interest rates that made it impossible for companies to borrow money.
The banking industry body, UK Finance, has said it is running the schemes in line with the government’s design.
In her letter to Mr Sunak, Reeves said the history of support to the banking sector meant they had to step up. The industry and regulators at the Bank of England have said that banks are well positioned to support the economy through the crisis. The banks on Tuesday night agreed to scrap dividend payouts to shareholders after Bank of England pressure.
“Banks were kept afloat by government and taxpayers during the financial crisis,” Reeves wrote. “I would urge them to play their part in helping small and medium-sized businesses through this crisis.”
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