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Ministers and regulators warn banks over conduct during crisis

Ministers and regulators have warned the UK’s banks against profiteering during the coronavirus outbreak.

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In a joint letter to banks’ chief executives, chancellor Rishi Sunak, the Bank of England governor, Andrew Bailey, and the interim head of the Financial Conduct Authority (FCA), Christopher Woolard, told UK banking chiefs to take “all action necessary” to make sure measures designed to ease the impact of the outbreak are benefiting households and businesses as planned.

 

“The priority for all of us – banks, building societies, government and the financial authorities – should now be to take all action necessary to ensure that the benefits of the measures… are passed through to businesses and consumers,” the letter said.

 

“This will require a willingness to maintain and extend lending despite the uncertain economic conditions. We must ensure that firms whose business models were viable before this crisis remain viable once it is over.”

 

It comes as members of the All-Party Parliamentary Group for Fair Business Banking raised concerns that some banks are requiring personal guarantees to issue government-backed emergency loans to business owners.

 

The Coronavirus Business Interruption Loan Scheme is a key element of the government’s plans to safeguard businesses during the Covid-19 crisis. The scheme offers loans of up to £5m, where the government promises to cover 80 percent of losses if the cash is not repaid.

 

But the British Business Bank, which oversees the scheme, told lenders they may require security for the loans at their discretion.

 

Primary residential property cannot be taken as security under the scheme, but it still opens borrowers up to potential possession proceedings should their businesses collapse.

 

 

In response, the All-Party Parliamentary Group for Fair Business Banking tweeted: “The Treasury must issue clear guidance on parameters and not allow security at ’discretion of the lender’ to muddy the waters. Unprecedented times require emergency funding. Keep it simple, and no (personal guarantees).”

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