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December 23, 2008
Small business leaders welcomed the new promise from the banks, which was made during Government-brokered talks.
Business groups have complained that despite billions of pounds of Government aid, small firms are finding it harder to negotiate vital loans and overdraft facilities as banks tighten their lending criteria.
Peter Mandelson, the Business Secretary, yesterday held talks between lenders and small business groups.
Following the meeting, the banks agreed to a new "statement of principles" covering lending to small firms.
Meeting a key demand, they agreed to cut the time it takes to transfer business accounts from one bank to another from ten to five working days.
The Federation of Small Businesses said the concession was "very welcome" because it would allow firms to shop around more easily between banks in search of better lending terms.
The banks have also agreed to consider business assets as securities before business-owners' personal assets. That could reduce the number of personal bankruptcies that result from businesses collapsing during the recession.
Lord Mandelson's meeting forms part of a wider Government effort to make the banks lend more freely during the downturn.
Alistair Darling, the Chancellor, will convene the first meeting of a new Lending Panel on Thursday.
The new body brings together ministers with banks and building societies, regulators and consumer groups to monitor loans to households and businesses
Mr Darling and Gordon Brown, the Prime Minister, have repeatedly called on banks to pass on to borrowers the full percentage cut in Bank of England base rates announced last week.
However, the Government's stance was undermined when Northern Rock, the nationalised lender, announced it will only be be passing on half of last week's interest rate cut to its standard variable rate borrowers
By contrast, Both Lloyds TSB and Nationwide say that their (SVR) loans will never be more than 2 per cent above the Bank of England base rate, meaning they will pass on all future cuts in full to their SVR borrowers.
Despite strong public rhetoric on the issue, some bank executives think ministers are playing to the gallery with public demands over interest rates.
"There is an understanding there that is not reflected in the public statements," said one banking source. "Ministers privately realise the issues we are facing."
Source:http://www.telegraph.co.uk/news