Nikhil Rathi, the new chief of the Financial Conduct Authority (FCA), told the Commons Treasury select representatives that the FCA is going to watch banks and the recovery process of the state-guaranteed debt, accumulated during the pandemic from small companies, very closely.
Meaning how banks treat small businesses will be acutely examined.
He stated that he wanted to dodge a repeat of the scandals that developed after the 2008-9 financial crisis, “If we are seeing activity which we believe is inconsistent with our rules, we will be supervising that closely, and we will intervene”.
Through the Government’s bounce back loan scheme, which aims to support small organisations withstand during the pandemic, commercial lenders have issued more than £40 billion of debt.
These small firms can potentially obtain low-interest loans of a maximum of £50,000, plus the debt which is issued with a 100 per cent state guarantee.
Only once these lenders begin to try to recover the money, can they claim on the guarantee. However, a specific process is awaiting confirmation.
Amongst well-known banks that have faced scandals and scrutiny over their treatment of small businesses are Lloyds Banking Group, who avoided the impact of a £245 million fraud that harmed or devastated businesses. Plus, NatWest’s (formerly Royal Bank of Scotland) no longer existing GlobalRestructuring Group.
Rathi said, “We’re well aware of the history here.”
“I think the banks are also well aware that they don’t want a repeat of what happened after the last financial crisis and hopefully collaboratively we can make sure that doesn’t happen.”
For more information and advice on matters relating to debt accumulated during the pandemic, contact our expert team today.