Vince Cable has demanded that banks show more transparency in their dealings with SMEs
UK business secretary Vince Cabl
e has announced that he wants all banks to publish lending figures to SMEs and to give full details of why customers are turned down for loans.
Cable warned yesterday (June 8) that any banks who do not meet lending targets for small businesses are going to face new taxes on bonuses, profits and balance sheets. He told MPs that Project Merlin
was a one-year project and that banks must ensure that targets for the year are met.
He said to the House of Commons that extra pressure would be put on banks to ensure transparency in their actions towards SMEs. Banks in the UK have insisted that the current low lending rate to small businesses is due to lack of demand, not loan refusals. However, Cable argues that banks have discouraged applications by offering high rates and not showing interest in lending.
The UK’s largest banks have all received letters instructing them to publish details of how Project Merlin offers them incentives to provide loans to SMEs. Chancellor George Osborne
announced in February that their pay would be linked to small business lending.
In addition, the banks were asked to publish their figures for lending to small businesses and the reasons for refusing loan requests to enable customers to appeal decisions.
In the first quarter of 2011, lending to SMEs was about £2 billion short of the target set for Project Merlin. SME lending was an essential part of the agreement as small businesses rely on loans to a greater extent than large corporations – and make up over half of the UK economy.