SME banking report finds “unfair” treatment of small businesses

The Treasury Committee’s report on SME finance has heavily criticised the “unfair” debanking of many legitimate businesses. It firmly believes that any small business doing legitimate work should have access to a bank account. The inquiry that has led to the report heard from over 140,000 businesses that had been debanked, and that banks often used “catch-all”, unclear or inconsistent terminology when giving reasons for their decisions.

The Committee wants:

• the PRA not to proceed with its plans to stop the SME supporting factor in Basel 3.1, as this would lead to an increase in capital requirements for banks that lend to SMEs which in turn may restrict supply of SME lending;
• the FCA to force banks to be more transparent about why debanking decisions are taken – and potentially to require banks to send them a quarterly report on how many accounts have been closed and why;
• something to replace the failed BBRS which will be independent and will meet the needs of small businesses which fall outside FOS jurisdiction;
• Treasury and the FCA to continue to support the FOS and ensure it is adequately resourced to serve SMEs within scope;
• the FCA to give the FOS powers to address personal guarantees for smaller firms; and
• Government and regulators to work with the British Business Bank to ensure maximum awareness of it within the SME community and to consider whether the Growth Guarantee Scheme should be made permanent.