Of Special Interest


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11th September 2012

UK retail banks promise reform and more SME lending

UK retail banks are seeking to improve their reputation. There have been a number of recent speeches and announcements.

Last week António Horta-Osório, CEO of Lloyds Banking, suggested in a speech that retail banks in the UK had lost their way and needed to return to old values. He said"..."Issue-by-issue and scandal-by-scandal the faith and trust in our industry has been eroded. Why? Because I believe that many banks lost sight of their core values and became complacent, non-customer-focused and inefficient,".
He added that a fundamentally different approach was required. This included changing to how banks serve their customers and pay employees at all levels. He was speaking shortly after Lloyds was severely criticised for the bonuses it awarded for sale of Payment Protection Insurance and the announcement of a wider enquiry into retail bank bonuses particularly those related to boosting sales. Speaking in New York on Monday Antony Jenkins, new Barclays CEO, stated, “Our ability to build a franchise over time depends on our reputation,” [See separate article 'No sudden changes to Barclays Capital'].

Royal Bank of Scotland announced more availability of loans to mid-sized corporates at a lower price using government money. RBS is to offer fixed or variable rate loans to UK manufacturers with turnover between £25m and £500m of between £250,000 and £25m million pounds over 3 to 5 years with the possibility of deferring capital repayments for two years. The fixed rates are 2.75% and 3.2%. The scheme uses the latest government initiative which funds the banks at just 0.25% via the Bank of England. Banks can borrow up to 5% of their current lending at this rate and then more on a pound for pound basis dependent on their growth of qualifying business lending.

In another scheme Britain's six largest retail banks are to refer businesses they have turned down for small loans to Community Development Financial Associations(CDFAs). The banks are not seeking commissions and just trying to be 'good citizens'. It is pointed out that many businesses are not aware of alternative sources of finance including the CDFAs which mainly operate in the more deprived areas of cities. The pilot is due to start before year end in five areas of the country. In addition to the banks the British Bankers Association is helping with the initiative.