Recommendations & Conclusions
10 items
2
Conclusion
Eighth Report - SME Finance
Acknowledged
The removal of the SME supporting factor under Basel 3.1 threatens to undermine the UK’s SME finance market by increasing capital requirements on lenders to SMEs. This will drive up the cost of finance for SMEs and may restrict the supply of lending as banks shift their loans away from …
Government response. The government acknowledged the Committee’s concerns regarding the removal of the SME supporting factor under Basel 3.1 but made no specific commitments to action.
HM Treasury
3
Conclusion
Eighth Report - SME Finance
Acknowledged
The PRA must ensure that the final implementation of the Basel 3.1 standards leaves capital requirements on SME lending no more stringent than they are under the current system and that international competitiveness with the EU and the US is not harmed. (Paragraph 26) Dispute resolution
Government response. The government acknowledges the Committee’s concerns regarding the removal of the SME supporting factor under Basel 3.1 but provides no commitment to action.
HM Treasury
4
Conclusion
Eighth Report - SME Finance
Acknowledged
We support the Financial Ombudsman Service in its role as the primary mechanism for SME banking disputes. We note concerns that the FOS is primarily equipped to deal with less complex cases but note the efforts undertaken by the organisation to improve specialist resource.
Government response. The government supports the FOS's role, noting its ongoing programme to improve service following a 2021 review, and commits to continuing regular engagement with the FOS to address operational issues and ensure aligned rules.
HM Treasury
9
Conclusion
Eighth Report - SME Finance
Acknowledged
HM Treasury must find a way to continue to meet the dispute resolution needs of those SMEs ineligible for FOS access (including considering whether the FCA was correct in assuming that expanding the FOS’ thresholds would be a disproportionate cost). A consultation on a replacement mechanism must take place by …
Government response. The government generally supports the Financial Ombudsman Service (FOS) and describes its important role in resolving disputes, but does not commit to finding a new mechanism for ineligible SMEs or consulting on a replacement.
HM Treasury
12
Conclusion
Eighth Report - SME Finance
Acknowledged
The FCA should continue their work into better understanding how financial institutions are using criteria like “reputational risk” or “risk appetite” and report their findings by the end of Q2 2024. It is essential that the FCA publish clear instructions by Q3 2024 to the market about how such criteria …
Government response. The government stated its commitment to ensuring SMEs have appropriate access to redress and proportionate regulation but did not commit to the specific actions or timelines recommended for the FCA or HM Treasury.
HM Treasury
13
Recommendation
Eighth Report - SME Finance
Acknowledged
The FCA should also require banks to submit quarterly data on business account closures to assist their wider review. The FCA should publish an aggregated form of this data on a periodic basis to improve transparency over business debanking and allow SMEs to make informed decisions on their choice of …
Government response. The government states a general commitment to ensuring SMEs have appropriate access to redress and proportionate regulation, but provides no specific actions regarding data collection or publication as recommended.
HM Treasury
14
Conclusion
Eighth Report - SME Finance
Acknowledged
We welcome the Treasury’s proposed rules changes on debanking, which will provide a greater deal of transparency to customers who suffer from an account closure. HM Treasury should introduce these regulations before the parliamentary summer recess,
Government response. The government expresses a general commitment to ensuring SMEs have appropriate access to redress and proportionate regulation, but does not specify action to introduce the proposed debanking regulations before the parliamentary summer recess.
HM Treasury
15
Conclusion
Eighth Report - SME Finance
Acknowledged
We commend the British Business Bank for its role in providing support to SMEs. We would like to see more smaller businesses visiting the Finance Hub and making use of its resources, as well as wider BBB programmes.
Government response. The government agrees on the British Business Bank's important role in supporting SMEs and expresses a shared desire for more SMEs to utilise its Finance Hub, committing to work with the BBB to improve access to finance through targeted interventions.
HM Treasury
18
Conclusion
Eighth Report - SME Finance
Acknowledged
HM Treasury and the BBB should consult on the merits of making the Growth Guarantee Scheme permanent, in order to provide a foundational support programme, which can be scaled up appropriately in a crisis. This would build long term security in the accessibility of finance for the SME population and …
Government response. The government states a general commitment to high standards of protection and financial inclusion in the banking sector, but does not address consulting on making the Growth Guarantee Scheme permanent.
HM Treasury
19
Conclusion
Eighth Report - SME Finance
Acknowledged
Disproportionate use of personal guarantees may be a factor in driving down access to finance, either owing to lack of collateral or simple risk aversion from businesses who do not wish to take them out. We support the FCA’s investigation into the fair and proportionate use of personal guarantees that …
Government response. The government provides a general statement of commitment to high standards of protection and financial inclusion, without specifically addressing the FCA's investigation into personal guarantees or its remit.
HM Treasury