Britain’s biggest banks have been ordered to “put their backs into it and get on” with lending more money to small businesses struggling to cope with the coronavirus lockdown.
Andrew Bailey, the Governor of the Bank of England, warned that the consequences will be dire if the lenders do not get money where it is needed as quickly as possible: “It does have to be tackled because otherwise it will destroy people’s livelihoods, which we shouldn’t do, and we’re going to get the scarring [of the economy” , which the Government is desperate to avoid.
Rishi Sunak, the Chancellor, also needs to play a role, he said, because a key delay is the requirement to carefully check every loan application to make sure the business is creditworthy – a serious challenge when banks face far more loan applications than normal.
“It is not easy often to form a view on the creditworthiness of small firms and particularly not so much what is their creditworthiness, but what will their creditworthiness be post-Covid?” said the Governor.
“You can either spend a lot of time on that judgement, in which case you are not going to get a lot through the pipeline, even with the best of intent. Or you can say, as banks and Government, ‘no, we are going to adopt a simpler process with a different risk appetite’.”