Banks face probe into 'racist' lending practices

Black entrepreneurs denied equal access to loans, says Lib Dem leader

Nick Clegg will today order an investigation into claims that aspiring black and ethnic-minority business people find it harder than white entrepreneurs to obtain bank loans and are then charged higher rates if they succeed.

The Deputy Prime Minister will raise fears that minority groups are not viewed evenly by lenders and argue that there is a moral and economic case to stamp out any prejudice they could encounter.

He will stop short of accusing the high street banks of institutional racism, but say there are sufficient concerns over lending policy for an urgent inquiry into the issue by the Government.

Mr Clegg will point to research showing that 35 per cent of people of black-African origin want to start a business, but only 6 per cent actually succeed in their ambition.

He will say there is evidence that companies run by people from black-African backgrounds are four times more likely than so-called "white firms" to be denied loans – and Bangladeshi, Pakistani, black Caribbean and black African-owned businesses have been subject to higher interest rates than white and Indian companies. He will say: "Anecdotally we hear this is a problem time and time again."

Mr Clegg will say there could be complex reasons for any lack of access to finance, but will add: "If we are serious about turning the UK into an island of entrepreneurs, we need to get to the bottom of this. What are the barriers to finance? Are our banks doing enough?"

Delivering the Scarman lecture in Brixton, south London, Mr Clegg will say: "Britain's banks, bailed out by the British people, have just as much responsibility as everyone else, arguably more responsibility, to help Britain build a strong and dynamic economy. Unleashing black and ethnic-minority talent is their duty, too."

He will announce the appointment of Andrew Stunell, the Communities minister, to "look at the barriers preventing black and ethnic-minority groups from accessing loans". He will say: "We have to work out what is going wrong and then we have to fix it."

Mr Clegg's speech comes a day after the chief executive of the taxpayer-backed Royal Bank of Scotland defended big bonuses for investment bankers against charges that the payouts divert money from lending to credit-starved small businesses.

Giving evidence to the Treasury Select Committee yesterday, Stephen Hester said there was no point in cutting payouts because they were mostly in shares rather than cash. He said that cutting bonuses would not free capital to boost lending to small and medium enterprises (SMEs). He said: "If there are large bonuses in banking, which of course is a shrinking thing anyway, it is not from that part of the business [SME lending]. The investment banking bonus pool... is mostly paid in equity so it doesn't affect capital."

Mr Hester said the bank was struggling to find good businesses to lend to rather than turning them away. He also claimed that the Independent Commission on Banking, which has suggested a raft of reforms to the industry, including a ring-fence between retail and investment arms, had under-estimated the cost of implementing its recommendations.

He said the plans would push up borrowing costs and potentially drive away customers, while being forced to hold more capital would impact on bank profits.

Lending in numbers

35 per cent More than a third of Black Africans say they want to start a business. 6 per cent actually do. (Black Training and Enterprise Group).

4 People of Black African origin are four times more likely than so-called "white firms" to be denied loans outright. (Minority Ethnic Enterprise Centre of Expertise).

Suggested Topics
News
Alan Bennett has criticised the “repellent” reality shows which dominate our screens
tvBut he does like Stewart Lee
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
tech
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Sport
David Moyes and Louis van Gaal
football
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
i100
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
News
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Life and Style
food + drink
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
News
A cabin crew member photographed the devastation after one flight
news
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Pharmaceutical Computer System Validation Specialist

£300 - £350 Per Day: Clearwater People Solutions Ltd: Pharmaceutical Computer ...

High Level Teaching Assistant (HTLA)

£70 - £90 per day: Randstad Education Birmingham: Higher Level Teaching Assist...

Teaching Assistant

£50 - £80 per day: Randstad Education Birmingham: Randstad Education is the UK...

Senior Java Developer - API's / Webservices - XML, XSLT

£400 - £450 Per Day: Clearwater People Solutions Ltd: Our client is currently ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits