New rules around small business lending are too harsh and have pushed banks away from small and medium-sized enterprises (SMEs) and into mortgages, Vince Cable said yesterday, revealing a new scheme to get around the set-up.
Global regulators have been working on the rules since the financial crisis struck, but the business secretary is now short-circuiting the system to boost small business lending. He now is offering government guarantees through the British Business Bank.
“We are piloting wholesale guarantees, where the government guarantees apply to new SME loan portfolios by banks,” he told a Bloomberg event. “It will make lending more attractive and allow banks to lend significantly more on the back of the same capital.”