Darling Tackles Banks On Loan Costs

Lending to small businesses is growing - that's what the UK's leading banks told the Chancellor today.

Alastair Darling met with the nation's most high profile institutions this afternoon, and pressed for more details on the financial charges small firms face.

Despite the British Bankers' Association (BBA) reported jump of £133m in business lending from May to June - totalling around £366m - Mr Darling said he is still "extremely concerned" by the charges imposed on lenders.

His claims that associated costs are too high were refuted by BBA chief executive Angela Knight.

Mr Darling, who held talks bank bosses at the Treasury, said despite a 0.5% record low in base interest rates, the cost of lending was still rising.

He called on the banks to help stimulate lending levels, insisting the Government did not inject money into the sector as a "charitable act".

Mr Darling also called on banks to stand-over their duty to the public.

However, Ms Knight defended the current rates set by lenders, suggesting wholesale prices in the money markets are much higher than the UK base rate.

She said the wholesale price of borrowing was roughly 1%.

"As far as the major banks are concerned they are lending, and increasing their lending," added Ms Knight.

She said firms should be able to demonstrate they have capacity to repay loans, and indicated that agreements are still assessed on a case-by-case basis.

"There will be difficult judgements at the edges and that's why it's important to keep close to the (bank) manager and get that business plan right."

Small Business Federation spokesman Stephen Alambritis lauded the Chancellor for bringing banks to account.

He said: "It is hugely important that Mr Darling keeps tabs on the banks to ensure they are lending money to firms, and at fair rates."

"Firms need to be able to reap the benefits of the historically low base rate."

(PR/BMcC)