Bank chiefs to head credit flow taskforce

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The Independent Online

The UK's top bank bosses will lead a new taskforce to help boost the flow of credit to small firms, it was revealed today.

Banks have been at loggerheads with politicians over the past week as the industry racks up £15 billion in first-half profits despite critics such as Bank of England Governor Mervyn King, who said the treatment of some firms by lenders was "heartbreaking".

The British Bankers' Association's new group - led by the bosses of the UK's six biggest banks - has been set up to assess credit demand from firms and put forward recommendations to boost funding in the banking sector and aid recovery.

Today, BBA chief executive Angela Knight fought back, saying that banks were "providing good finance to viable business" but firms were looking to cut debts due to the impact of recession.

She told the BBC Radio 4 Today programme: "We have a situation in which, right now, all the numbers show that there is continuing good provision of finance to business; at the same time, business has overwhelmingly paid back its debts."

She added that the taskforce - to be chaired by BBA and HSBC chairman Stephen Green - would look to address "pinch points" in the system as recovery and the demand for working capital gradually takes hold.

The taskforce - which was proposed by the industry itself - will report its initial findings to Chancellor George Osborne in early October. The letter states: "We recognise the collective role we have to play."

Mr Green's letter said the taskforce would look at policy measures to restart the securitisation market, where banks package up and sell on bundles of loans - in turn raising money for new lending.

Securitisation was hit by the credit crunch amid a breakdown of trust over potentially "toxic" assets, crippling the flow of new lending.

The group will also make recommendations to ensure that mid-market firms with up to £100 million in turnover have access to finance, as well as sharing best practice on advice and support to smaller businesses through the cycle.

The banks will also look at the impact of the new capital requirements on the industry as well as ways to improve Government support mechanisms for business such as the enterprise finance guarantee scheme.

"We need to look at these business finance and business aid schemes because there may well be businesses who are hungry for finance but there is no security available for that finance," Ms Knight added.

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