The Treasury Select Committee is set to begin an investigation into bank’s lending to small businesses as a scandal grows about the treatment of this economically important sector. Three areas are to be investigated: access to finances for SMEs, competition in the sector, and the treatment of SMEs by banks.
This comes after reports that detailed the behaviour of Royal Bank of Scotland in regards to small and medium enterprises. RBS are the biggest lender to this sector.
Advisor to Vince Cable, Lawrence Tomlinson, released a damning report in November saying RBS had intentionally made viable companies go bankrupt for their own gain. This came after a previous report by Sir Andrew Large, the former deputy governor of the Bank of England, which attacked RBS’s willingness to lend to SMEs.
It is thought RBS will announce some restructuring this week in order to tackle these issues. The select committee is expected to talk to smaller lenders plus representatives from the big banks, with RBS likely to be included.
The investigation will start tomorrow, with appearances from members of the Federation of Small Businesses and the Confederation of British Industry as well as Professor Russel Griggs, a reviewer of business appeals about rejected credit application.
The committee chairman, Andrew Tyrie, said: “SMEs report that they are struggling to secure adequate access to finance, from banks and elsewhere. It is vital to a sustainable economic recovery in the UK that this market be restored to working order.”