HSBC’s CEO today blamed the sheer demand for coronavirus loans for banks’ apparent slowness to lend out cash to struggling small businesses.
Noel Quinn said banks have seen a “significant volume” of applications for the Coronavirus Business Interruption Loan Scheme (CBILS) so far. And he rejected the notion that a full government guarantee of such lending would speed up the approval process.
Currently the government underwrites 80 per cent of coronavirus loans made under CBILS. And last night chancellor Rishi Sunak said he “remained unconvinced” about taking on the risk for the remaining 20 per cent.
But HSBC’s boss today said such a move was not necessary. Instead he blamed a combination of a complex application process and the amount of demand banks have seen.
The latest available data shows coronavirus loans doubled last week to £2.8bn, but only around half of 36,000 applications have been approved.
Government ‘doesn’t need’ to underwrite entire CBILS scheme
“I dont think it’s about 80 vs 100 [per cent], I don’t think that’s the difference,” Quinn told City A.M.
“There was a significant amount of volume in the early days and some of the scheme requirements to perform viability assessments of future cash flows created a requirement to perform work that took time.”
Instead he predicted the speed of CBILS approvals will increase after banks yesterday removed a requirement for small businesses to predict their future earnings.
“There’s been some adjustments to the criteria in the last few days… and therefore those should make it easier to process those transactions,” Quinn told City A.M.
“The primary issue was around scheme eligibility and setting up the process, that was something we had to react very quickly to.
“In that first week we developed and launched an online portal for customers to fill out applications online to allow digital processing of this volume of work. To do it all via call centres and manual paperwork would have meant the response times would have been that much lower.”
HSBC, which today revealed its first quarter profit fell 50 per cent because of coronavirus, said it has lent out around £600m under CBILS to 4,200 small businesses.
That is equivalent to around 17 per cent of the total lending of coronavirus loans, Quinn said.
That compares to Natwest’s (formerly RBS) own estimate last week that it has lent out £937m. City A.M. understands that sum to be worth around half of total CBILS lending at the time.
But small businesses have criticised banks for rejecting their loan applications. And City heavyweights have called on UK banks and the government to step up their rate of lending.
Yesterday Sunak appeared to respond to that criticism by committing to underwrite 100 per cent of so-called bounce back loans worth up to £50,000. Firms that apply can receive those loans within 24 hours from next Monday.
HSBC processing coronavirus loans ‘at pace’
Quinn defended banks’ rate of lending, however. “We are progressing through those applications at a significant pace,” he said on a media call. “The new scheme launched yesterday, we welcome that scheme and think it will be very beneficial. There has been good progress but more still to come.”
TheCityUK boss Miles Celic also stepped in to defend banks over their lending record today.
Speaking to City A.M. editor Christian May on City A.M’s daily City View podcast, Celic said banks were not “shirking their responsibilities”.
He added: “It was the taxpayer and the country that had to stand behind the banks [in 2008, whereas] this is an opportunity for banks and the financial sector to stand behind the country.”