Alistair Darling gives the banks a whipping

Speaking on the BBC’s Andrew Marr Show on Sunday, the Chancellor said he was “extremely concerned” over the banks’ treatment of small and medium-sized firms.  The banks, he said, are charging entrepreneurs too much for credit and must “live up to the promises that they made”.

Following his interview slot with Marr, the Chancellor met with seven of the country’s biggest banks at the Treasury yesterday along with Lord Mandelson, Baroness Vadera, City Minister Lord Myners and senior officials from the Bank of England. He warned the banks that the Treasury will be combing through their lending books over the coming weeks and “looking over their shoulder” to monitor whether they are failing to offer loans at fair rates to entrepreneurs.

It’s about time Darling stepped up pressure on the banks – but is it enough? The Forum of Private Business has called for more flexibility for bank managers to use their judgment and discretion when approving loans. This, they say, will help get vital credit flowing to small businesses once again and prevent firms from being unfairly classed as high-risk.

“Instead of lending on a case-by-case basis, entrepreneurs believe that the banks are deciding applications according to an unfair ‘tick-box’ mentality “ comments the FPB’s Chris Gorman. “Many of our members feel that their businesses are perfectly viable but are being denied loans or overdrafts because a computer somewhere says ‘no’. We believe that some banks are automatically denying credit to pubs, bars and restaurants, for example.  “We want to see a return of the old-fashioned relationships between small businesses and their local bank managers in order to improve the flow of finance to firms that deserve it at this crucial time.”

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