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27 July 2009

UK Chancellor Darling worried by banks’ loans charges


Banks need to raise margins to rebuild battered balance sheets and cope with the recession; however, the lack of affordable finance for businesses will scupper an economic recovery.

Alistair Darling has expressed “extreme concern” about the charges being levied by high street banks on loans to small businesses and called a meeting on Monday 27 July with senior bankers in Whitehall.

While the chancellor has recognized that banks need to raise margins to rebuild battered balance sheets and cope with the recession, he is worried that a lack of affordable finance for businesses will scupper an economic recovery.
 
 “What companies are being charged does seem to have gone up relative to what banks are actually having to pay because of the fact that we have very low interest rates,” Mr Darling said on Sunday.
Speaking on the BBC’s Andrew Marr Show, the chancellor said he would ask each bank: “Why, when the cost of borrowing is coming down, the cost to small business appears to have gone up?”
The Tories accused the chancellor of “synthetic outrage” after repeated promises to address the problem. “They promised action in January but have not delivered by July. This failure is costing jobs and businesses,” said Mark Hoban, a shadow Treasury minister.
 
Angela Knight, chief executive of the British Bankers’ Association, sought to defend her members, pointing to figures showing an increase in the level of loans to small businesses – though no details on the amounts being charged. Ms Knight blamed a lack of capacity in the wholesale market for pushing up bank costs and said the need to “hold twice as much capital as before the recession” was holding back lending.
 
Stephen Alambritis of the Federation of Small Businesses said: “It is hugely important Mr Darling keeps tabs on the banks to ensure they are lending, and at fair rates. Firms need to be able to reap the benefits of the historically low base rate.”
 


© Financial World


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