Business bank plan underwhelms

Freelance journalist
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The government plan for a small business bank to make it easier for growing companies to gain access to finance could take “decades” to get right, the Association of Chartered Certified Accountants (ACCA) warned.

The planned business bank announced last week on the BBC’s Andrew Marr show by Chancellor George Osborne – is the latest in a sequence of government business banking initiatives to boost the faltering economy.

The new bank will aim to bring together the '”alphabet soup” of existing funding schemes available to small businesses, such as the Business Finance Partnership and Enterprise Capital Funds, which critics say are confusing and have had little impact.

ACCA gave the planned business bank a cautious welcome.

Manos Sch...

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Why not an existing bank?

Given that the government already owns a large percentage of several banks, why does it not just turn one of those into a business bank, instead of going through all the fuss and bother of setting up a new one?

M

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20th Sep 2012 11:47

Doesn't address affordability of finance

The draft papers I've seen so far (and they are draft, so things could still change) indicate that the Business Bank will be a wholesale operation.  Actual distribution of finance will be handled by retail banks.

The problem I can see with this is that the retail banks will treat it just the same as previous government business finance initiatives.  They'll carry on lending to small businesses at the same unaffordable rates as at present, with the same strict criteria and additional terms - personal guarantees, charges on personal assets etc.  The retail banks will be getting the funds at a favourable rate, and will just use the extra margin they make to pad their balance sheets and carry on paying high bonuses to senior staff.

I hope that when detailed plans are released by the government that the potential for abuse by retail banks is addressed, but I'm not optimistic.

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