MPs launch inquiry into banks' small business lending habits

MPs are planning an inquiry into small business lending amid widespread criticism of the big banks’ behaviour towards them.

The state-backed Royal Bank of Scotland has found itself at the centre of the furore along with a number of other big banks, all of which are to come under heavy scrutiny over the coming weeks for not offering sufficient credit to SMEs.

Andrew Tyrie, chairman of the Treasury Committee, firmly stated that "like individual customers, SMEs have been badly treated by their banks". It was revealed a review of lending habits would be conducted and that action would be taken to bring any negative or restrictive behaviour to an end.

Speaking on Friday (21 February), Tyrie claimed that it was imperative to ensure SMEs have the necessary support from their banks so they could form an important part of a “sustainable economic recovery”.

Wasting little time, a short inquiry was started yesterday (25 February) and is being conducted by a committee comprising of 13 politicians from across the leading parties. The committee, headed by Tyrie, will be looking at three main areas: access to finance for SMEs, competition in the sector, and the treatment of SMEs by banks.

As well as the aforementioned RBS, the inquiry will be probing at the lending habits of the other four companies that make up Britain’s five biggest banks – Lloyds Banking Group, Barclays, HSBC and Santander UK. However, RBS has been more heavily criticised than the others, largely because it is 81 per cent owned by UK taxpayers.

What’s more, in November 2013 Lawrence Tomlinson, adviser to the Business Secretary Vince Cable, launched a scathing attack on RBS that stated the bank had pushed companies into insolvency for its own profit. Britain’s financial regulator and RBS have since launched their own separate investigations into these accusations.

With widespread reports suggesting that SMEs are still being treated poorly by the big banks, the news that MPs have intervened to support their cause will be greatly welcomed by Britain’s smaller businesses.