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Monday, November 25, 2013

Banks' treatment of small business under investigation

Today's Independent reports on a referral to the Financial Conduct Authority by the Department for Business, Innovation and Skills of allegedly poor practice by two partly-nationalised banks that if proven will underline how badly small businesses are being treated by financiers.

I have an interest in this because the allegations closely mirror the case of one of my constituents, who I have been trying to help, and who, along with other South Wales businessmen in the same situation, I and fellow Welsh Liberal Democrats AMs arranged to meet with Business Secretary, Vince Cable earlier this year.

A report written by businessman Lawrence Tomlinson, who is entrepreneur in residence at the Department for Business, Innovation and Skills focuses allegations on the turnaround division at RBS – its Global Restructuring Group (GRG):

The division handles loans classed as being risky and is understood to have the power to scrap loan deals, impose inflated interest rates and charge hefty penalties.

But the report alleges that firms not necessarily in immediate financial distress were “engineered” into GRG, sometimes through small technical breaches of loan terms, such as late filing of minor financial information.

They were then hit with exorbitant rates and fees, which in some cases caused them to collapse, allowing RBS to buy their property and assets on the cheap for the benefit of its West Register property arm.

One business that submitted evidence to Mr Tomlinson said that it paid £256,000 in fees alone while in GRG.

Another said that RBS made it pay an immediate sum of £40,000 to continue borrowing terms with the group.

Mr Tomlinson said he was calling for “immediate action to stop this unscrupulous treatment of businesses”.

The report found a “disproportionately high” number of complaints against RBS, but also found examples of similar practice at other banks.

Another part-nationalised player Lloyds Banking Group is also criticised for concentrating on short-term gain at the expense of its business customers.

Along with my fellow Welsh Liberal Democrats AMs I have asked for a meeting with senior officials at the bank associated with my constituent. Maybe this inquiry will flush out the issues into the public domain associated with that case as well.
Comments:
About time. One of the key reasons the UK economic 'recovery' (and the United States for that matter) has been so anaemic is the lack of support and common sense as it has been applied or rather misapplied to small businesses.
 
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