Lloyds ‘is starving small firms’ of credit
By Ian Fraser
Published: The Sunday Times
Date: July 19th, 2009
John Swinney, Scotland’s finance secretary, has accused Lloyds Banking Group, owner of HBOS and Royal Bank of Scotland, of abusing their dominant position in the Scottish banking market and of starving small and medium-sized businesses of access to finance.
Swinney has written to the chancellor, Alistair Darling, urging him to introduce measures to ensure greater competition in the Scottish banking sector. Failure to do so risks harming Scotland’s chances of economic recovery, he warned.
He told the chancellor that Lloyds Banking Group and RBS have too dominant a share of the market and that SMEs are suffering because of inadequate access to finance.
On Thursday, the Scottish government published a survey on SME access to finance. This confirmed that the market is heavily concentrated. RBS or Lloyds Banking Group were found to have 75% of the market between them. Their market shares of the SME sector were 40% and 35% respectively.
The survey also found that, while most Scottish firms are finding they can access the credit they need, it has become more expensive and the proportion being rejected for finance has risen sharply. The problem is particularly acute among micro- and high-growth firms.
High-growth companies said they are having credit facilities withdrawn, or that finance is being reduced or increased in price on re-financing. The survey found the percentage of firms that have applied for funding but had it denied has surged from 13% in 2007 to almost 40%.
In an interview with The Sunday Times, Swinney said: “For our economy to recover strongly and sustainably, it is crucial that viable businesses are able to access the finance they need. We have called on banks to step up responsible lending — it is crucial they do so — but we are concerned over lack of competition in the SME finance market following the merger of HBOS with Lloyds TSB.
“We need competition and greater choice in financial products for our businesses to be able to contribute to the growth and recovery of the economy. That is something the UK government must address.”
In his letter to Darling, Swinney said: “As you will be well aware, in addition to the OFT report, the Treasury Committee inquiry second report into the banking crisis was published on May 1. Among other recommendations, the report called on the UK government to address the issue of competition concerns during the next two years. I would be grateful if you could advise on how the UK government intends to respond to this.”
A spokesman for RBS said the Scottish government’s research was misleading. He said it was based on interviews with 1001 SMEs completed between March 15 and April 10.
He said the bank has already lent £36m to Scottish companies under the Enterprise Finance Guarantee Scheme introduced in January and that “four out of five applications to the EFG scheme are dealt with in three weeks”. He said RBS and NatWest’s acceptance rate on SME loans and overdrafts is 85%.
Donald Kerr, head of commercial banking at Bank of Scotland, part of Lloyds, said: “Since this research was carried out, Bank of Scotland has been actively lending to both new and existing customers. We remain dedicated to providing financial advice and solutions to all of our viable customers. We’re committed to helping Scottish businesses survive the recession, but to prosper.”
This article was published in The Sunday Times on July 10th, 2009. To view on Times Online, click here
PDF 
Short URL: http://www.ianfraser.org/?p=881
Posted by admin
on Jul 19 2009. Filed under Article Library, Latest Articles.
You can follow any responses to this entry through the RSS 2.0.
You can leave a response or trackback to this entry