Darling warns banks someone is looking over their shoulder

Darling warns banks someone is looking over their shoulder


Following yesterday’s summit with the chief executives of seven banks, Chancellor Alistair Darling warned lenders that they would face increased scrutiny in their dealings with businesses, saying: “It is very important that each and every bank knows that there is someone looking over their shoulder.” 

The Chancellor also hinted that there could be a competition investigation to ensure the UK banking system remains competitive – less than a year after competition rules were waived in order to enable Lloyds TSB to take over the ailing HBOS.


The resulting merger, Lloyds Banking Group has been forced to commit £14 billion to lending in return for placing their most toxic debts in the Government’s asset protection scheme. The other state-rescued bank, Royal Bank of Scotland, has committed to lending £25 billion.


However, Mr Darling rounded up the banks yesterday to say that he was “concerned” about the cost of credit to small businesses – bank fees soared 62.2% during the first quarter of last year and another 11.9% in the first three months of this year.


Despite the base rate standing at a record low, businesses are still paying way above that, with the Federation of Small Businesses complaining that lenders are demanding higher spreads and fees on extended or renewed facilities.


Banks have defended the higher cost of credit, saying that they are pricing for increased risk. It has been estimated that 600 small businesses a month are failing, with banks stating that demand for credit has therefore been reduced.


The British Bankers’ Association added that it in the current climate it is right that firms should demonstrate how loans will be repaid before banks lend to them, which proves that the old saying “a bank is a place that will lend you money if you can prove that you don’t need it” still rings true.


Do you know of any firms that are struggling to access finance at the moment? Do you think this meeting between the Chancellor and the banks will go some way in resolving the situation? Send your comments to

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