Government warns banks not to withhold vital funds from businesses struggling due to coronavirus
Alok Sharma issues the warning in Downing Street.
3 min read
A senior Cabinet minister has warned banks it would be "unacceptable" if they withheld cash from businesses struggling to survive during the coronavirus crisis.
Business Secretary Alok Sharma hit out amid reports that some are imposing onerous terms on loans being given to firms whose revenues have dried up.
Under the Coronavirus Business Interruption Loan Scheme, the Government has promised to underwrite up to 80% of interest-free loans given to companies over the next 12 months.
But some businesses claim that once the year is up, banks are threatening to impose interest rates of up to 30% - well above the Bank of England base rate of 0.1%.
Others are also asking company bosses to put up their homes as collateral in return for the cash.
At the daily Downing Street press conference, Mr Sharma said the banks must re[ay the debt they owe taxpayers who bailed them out at the time of the 2008 financial crash.
He said: "The Chancellor, together with the Bank of England and the Financial Conduct Authority, wrote to the chief executives of the UK banks to urge them to make sure that the benefits of the loan scheme are passed through to businesses and consumers.
"And it would be completely unacceptable if any banks were unfairly refusing funds to good businesses in financial difficulty.
"Just as the taxpayer stepped in to help the banks in 2008, we will work with the banks to do everything they can to repay that favour and support the businesses and people of the UK in their time of need."
He added: "In response to concerns that we have heard from businesses, we are looking at ways in which we can ensure they get the support they need.
"The Chancellor will be saying more on this in the coming days. It is crucial that when we overcome this crisis, as in time we will, that businesses are in a good position to move forward.
"Time's are tough, and we have harder times ahead of us. But I know that together we will pull through."
Shadow Chancellor John McDonnell said banks must also do more to help individuals experiencing financial difficulties during the crisis.
He said: "Some banks have taken small steps to provide overdraft buffers in recent days but what we now need is for co-ordinated action across the sector on overdraft and credit card charges for all customers for at least three months.
"This means a commitment that banks are reversing recent hikes to overdraft interest rates, no credit card withdrawal or late payment fees, clear agreement on interest-free overdraft borrowing, no other overdraft charges, and these rules being set out publicly rather than left to the banks' discretion.
"The Government and the FCA must show some leadership on this, urgently convene a meeting with the banks, and if necessary introduce emergency regulations or changes to the overdraft pricing policy statement to ensure that people are not hit with sharp charges during this challenging time for all of us."
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