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Government criticised for lack of bank lending

Date: 01 May 2009   |   Author: Tristan Young

The Treasury Select Committee has hit out at Government-owned banks for failing to improve lending to small businesses.

The criticism backs the views of several independent car leasing firms that contacted BusinessCar to voice their fears about the increasing difficulty of obtaining credit from these banks.

In the report, Banking Crisis: Dealing with the Failure of the UK Banks, the Treasury Select Committee stated: "We are very concerned about the availability and terms of credit to the small business sector, and the slow movement on this issue by the banks.

"We regret the reports of sharp increases in bank charges and arrangement fees, which can often be more damaging to businesses than higher interest rates. We deplore the behaviour of a number of those banks who have received so much public money and behaved in such an insensitive manner, particularly to established customers."

The committee goes on to call for the Lending Panel, which monitors bank lending to businesses and retail customers, to construct a clear strategy for the Government to improve funding levels.

The report also concludes: "It is widely accepted that the Government has been obliged to intervene very heavily in the banking sector to ensure its survival and maintain economic stability. In doing so, competition concerns have not been a priority.

"However the benefit of free competition in this area remains important and we recommend that the Government address this issue during the next two years."