Darling questions banks' business lending practices

It’s been a long time in coming, but it looks as though the government has finally seen fit to intervene: later today, almost 10 months after the banking bail-out, chancellor Alistair Darling will meet executives from the British banking sector to question them over their lending practices.

The meeting follows remarks by Darling on BBC1’s Andrew Marr show yesterday, in which he said he was ‘extremely concerned’ the cost of borrowing is rising for small businesses at a time when the Bank of England’s base rate is at a record low.

“What companies are being charged seems to have gone up relative to what the banks are having to pay.

“We did not stabilise the banking system... out of some charitable act or because we felt sorry for them. We did it because if you don’t have a banking system that provides credit for small businesses, you will make recovery and prosperity after that much more difficult.”

Angela Knight, chief executive of the British Bankers’ Association (BBA) hit back at the comments, saying banks could not lend at the base rate because of the amount they have to pay for the funds they borrow in the wholesale money markets.

“It is a very difficult market out there, the recession is a big one and some sectors are hit more than others,” she said.

“Demand [for loans] has dropped off and we need to address this as well.”

But David Frost, director general of the British Chambers of Commerce (BCC) said he was ‘still hearing too many stories of small businesses being unable to access appropriate funding’.

“It will be business that drives the UK out of recession, but that can only happen if the banks are prepared to play their part. The situation is complicated but the government certainly needs to keep the pressure up.”

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