Business bank accounts form taskforce to fight government criticism

The CEOs of the six biggest business bank accounts in Britain have banded together and formed a taskforce to strike back against recent criticism from the coalition government regarding their business lending practices.

In response to last week’s banking sector profits that, combined, totaled in excess of £15bn, they drafted a letter to Chancellor George Osborne to acknowledge the need for banks to extend business loans to companies that have the ability to repay them.

Despite this olive branch offered to the government, there is no concession in the letter that the banks are falling short of any duty to offer those loans.

HSBC chairman Stephen Green drafted the letter, informing the Chancellor that the new taskforce will examine four primary areas in regards to lending practices: the cost of lending to companies and the demand for business loans; aiding banks obtain the necessary funds to offer loans through a securitisation process; how businesses can avail themselves of lending schemed backed by the government; and alternative methods for securing finance such as utilising trade finance.

This new salvo in the battle between High Street and their detractors was fired soon after banks announced that their business loans were being repaid faster than new ones could be granted, and that demand in regards to lending has undergone reductions of up to 25 per cent.

The British Bankers Association is co-ordinating the efforts of the group of six banks, stating that the CEOs of RBS, Santander, Barclays, Standard Chartered, Lloyds, and HSBC will be chairing the taskforce jointly.

Banks are also feeling the heat from the coalition government in the form of a recently set up commission designed to examine the possibility of breaking up their businesses into smaller entities.

The current economic downturn and the resultant widespread bank crisis has led to debates in regards to banks becoming “too big to fail” and its cost to the UK taxpayer, especially in light of the combined £75bn in taxpayer money used to bail out such banks as Lloyds TSB and RBS.

The bank failures have also led to a significant reduction in business lending.  While politicians and business leaders maintain that banks are discouraging would-be borrowers by making the terms of any business loan distasteful, banks counter that in light of falling demand, they must pick and choose their finance recipients carefully to avoid another crisis.

The full text of the letter is available for download from the BBA.

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