Editorial team AccountingWEB.co.uk
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Business credit scheme rejected by banks

24th Mar 2010
Editorial team AccountingWEB.co.uk
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Lloyds TSB has criticised a new scheme which gives an independent adjudicator the ability to overturn a bank’s decision to deny loans to small companies.

Delivering his 2010 Budget speech, chancellor Alistair Darling said business owners who feel they have been unfairly turned down for finance will be able to appeal to a new 'credit adjudication service' which will be able to force banks to hand over the money if it rules in favour of the business.
According to the Department for Business, Enterprise and Regulatory Reform, the initiative will worked with an "expanded" Financial Intermediary Service, a scheme run through Business Link which assists business owners when applying for bank finance.
But Simon Featherstone, managing director at Lloyds TSB Commercial Finance, criticised the scheme as unnecessary and an "immense cost". According to Featherstone, a similar initiative exists in France which requires 1,000 civil servants to run the process.
"We've got all our combined expertise in times of Lloyds heritage about being able to do this kind of lending but we're supposedly going to get civil servants expertise coming in over and above us telling us where we've got it right and wrong," he told BusinessZone.co.uk. "That's going to be a fascinating challenge to see how it plays out.
"There is a real disconnect between our genuine appetite to lend – and I would swear on any bible and look anyone in the eye and say we've remained 100% open during the last 18 months – and the fact that we still have too many people who approach us with business proposals that frankly have no chance of success.
"We've got a lending target that we're legally committed to so it's in our interests to lend in every possible opportunity where we believe our shareholders or our depositors will get their money back."
Steven Pegge, head of external affairs at Lloyds TSB, also questioned the statutory powers to be given to the service. "If the adjudicator forced a bank to lend and it then led to a bad debt and the government was not taking any responsibility that would be difficult for any commercial organisation," he said. Pegge added that he feared the process could lead to "more unproductive bureaucracy involved in looking at issues which have already been examined".
Pegge said he was confident the government will discuss the issue with the bank "within the next few days".

Replies (5)

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By raybackler
24th Mar 2010 19:20

This is bureaucracy gone mad

This is a political sop that is going nowhere.  Banks can't make money unless they lend.  I have come across some bank managers who are reluctant in some cases because they are timid or short-sighted, but if it is a good proposition, there is always someone willing to lend.  I can't see government picking up the bad debts and I can't see many businesses wanting to get a government bureaucracy involved that may take months to respond, when tyhey could just go somewhere else.



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By johnjenkins
24th Mar 2010 20:25


Although I don't think this scheme will ever take off, the theory behind it is positive.

Banks, these days will only lend to squeeky clean businessess so what about the guy who makes a few bob, loses a few bob, etc etc. A lot of real creators get told "computer says no" so some sort of appeal proceedure might be the answer. I know for a fact that the Government guarantee scheme is not favoured by banks. So not only do we have banks that have majorly contributed to our present economic situation, they are refusing to help get us out of it.

John Major once said, "in a time of recession it is prudent to borrow". This Government has also taken that stance. Yet the tax payer has to pull their horns in and pay the piper!!!!!!!!!!

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By ronmorris23
25th Mar 2010 08:41

Banks and loans

Surely, you are not asking banks to have  social conscience, compassion, collective resposibility?

Wise up! Banks and financial institutions are in the business of making money - and will protect that right with 'red tooth and claw'.



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By aburt01
25th Mar 2010 13:01

and I for one am glad the banks are making money...

I expect the banks to be accountable to me the shareholder, via our pension fund investments, "our" taxpayer investment, our deposit in the savings accounts and as workers investing in UK plc. 

If UK banks can't make a case for lending money, they wont.  Why should they?

It was irresp lending @ low rates by some banks (NR anyone) that got us into this mess. e.g. "Unregulated" 125% mortgage suicide.

It is as if the regulators in the USA and UK collectively decided to allow whatever people wanted. "Let them eat cake" they said.

Now a period of adjustment is required. No pain, no gain as the slimming world would have it.

The Govt/taxpayer was always going to make a profit from the preferential banking shares if they allow the banks to "shape-up" and get fit again.

All our banks need to be responsibly profitable for all our sakes in the long run.


What can any Govt or civil servants add to the loans process, except delay?

Besides it is the new implied rule from Govt and other regulators that all banks have to shore-up their balance sheets with cash, talk about mixed messages from regulators, incentives to lend are further reduced.

And being themselves solid financially, Lloyds TSB were encouraged/allowed to take-over the less-well-run bank next door when they should have kept clear. No, it was in Govt interests to see that deal done.

I do not think Govt role anywhere down the line has been helpful, even when considering the "forced" investment in banks on our behalf at a seemingly advantageous low price.  I note how banks like Barclays went elsewhere for short-term cover.


You still have a choice in this country, there are other lenders out there who have not been hit, may I recommend my local building society.

Norwich and Peterborough normally give a good hearing to your business needs.


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By johnjenkins
25th Mar 2010 15:25


Its a pity those same people who decided to lend to third world countries (circa 1980's) and bought atificial American bonds weren't allowed to lend to UK business.

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