Coronavirus: UK watchdog warns banks over bailout bottlenecks

The Financial Conduct Authority said there could not be a repeat of alleged historic shoddy treatment

Britain's finance chief Rishi Sunak has set out plans to support small businesses. Reuters

Small businesses must be treated fairly to stay afloat amid the coronavirus outbreak, the UK’s financial watchdog has warned the country's top banks.

Small and medium-sized enterprises (SME’s) have complained about shoddy treatment in the past by banks and a number of leading institutions have admitted to mistakes.

“Our objective will be to ensure that there is not a repeat of the well documented historic issues in the treatment of SMEs,” said Christopher Woolard, interim chief executive of the Financial Conduct Authority, in a letter to the heads of banks.

“As we consider the move from initial crisis response to a medium-term model, it is critical that we learn the lessons from those events and we cannot see those mistakes repeated.

He told them that each lender must designate a senior manager to oversee small business lending.

“We will also look for evidence that, in discharging its oversight role, the Board is collecting information on the bank’s treatment of SMEs and, where appropriate, challenging the senior manager.

SMEs are able to apply for government-backed loans as the economy is hammered by the virus outbreak.

Only one-in-five loans have been granted however of those who have applied via the lending scheme.

Under the Coronavirus Business Interruption Loan Scheme, £1.1 billion has been approved to SMEs so far. The funding is being handed out by a select list of British lenders. While more than 6,000 applications have been accepted, some 22,000 are still being processed.

“The banking and finance sector recognises the challenging conditions faced by many businesses and the critical role we must play in helping the country get through this crisis,” said Stephen Jones, Chief Executive of UK Finance, a trade association.

“Frontline staff in local branches and call centres are working incredibly hard to help firms access finance as quickly as possible amid unprecedented demand. Like all businesses they are working at reduced capacity as many staff are self-isolating or looking after family.”

The Federation of Small Businesses said the approvals were an important stepping stone, but needed to be increased at a faster rate.

The FCA also has warned that most insurance policies for SME’s only offered basic cover and didn’t include pay-outs in relation to the pandemic.

“In contrast, there are policies where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly,” Mr Woolard said.