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SMEs ‘may get regulatory protection’

Date Added: 26/02/2014  

MPs may decide to provide Britain’s small to medium-sized enterprises (SMEs) with specially designed regulatory protection, once they conclude their investigation into how they have been treated by big banks.

The Treasury select committee announced that it intends to examine all complaints made by SMEs concerning banks. These grievances range from refusals to provide funding to claims of bullying. This investigation has arisen from evidence given to MPs about the negative experiences SMEs have encountered in their dealings with financial institutions.  

Lawrence Tomlinson, a government advisor, handed Vince Cable a “dossier” of complaints he had collected about the Royal Bank of Scotland (RBS), which he believed demonstrated how the company had acted in “morally wrong” manner.

MPs also heard evidence from Sir Andrew Large, who penned a report detailing the lending practices of RBS. In his review he said that there were many “devastating” stories of how the bank had ruined businesses and the lives of SME owners.

Further documentation came from the Financial Conduct Authority’s investigation into the interest rate swaps mis-selling scandal.

Andrew Tyrie, chairman of the committee, said: “Like individual customers, SMEs have been badly treated by their banks. The mis-selling of interest rate swaps caused huge detriment. Although redress is being provided, many firms suffered significant losses.”

In his opinion, Britain’s SMEs would benefit greatly if the regulatory framework was changed to include specific protection for smaller businesses.

“Regulatory and other impediments to competition need to be removed, enabling SMEs better to take advantage of new sources of finance. More competition can also drive up standards,” he added.

As well as looking into how small businesses are treated by banks, the inquiry will also examine how lenders provide access to financing for SMEs and competition within the industry will be reviewed.

The first official meeting of the committee was held today (February 25th). Russel Griggs, the head of the Banking Taskforce Appeals Process, will be the first party to provide evidence. 

During the course of the inquiry, representatives from the Federation of Small Businesses and the Confederation of British Industry will also be heard. Challenger banks will be called to give evidence, to ensure the hearing is balanced.

Hopefully, the committee will decide to provide regulatory protection to SMEs so they are able to flourish and grow. Small companies are often seen as the backbone of the UK’s economy, so it is vital they are able to create and maintain healthy lending relationships with banks.

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