Businesses must not be ‘collateral damage’ in banking reform

Tuesday September 13th, 2011

The British Chambers of Commerce (BCC) has commented on the final report by the Independent Commission on Banking.

John Longworth, Director General of the British Chambers of Commerce (BCC), said that any reforms to the banking system proposed by the Vickers report ‘must be considered in the wider context of economic growth’.

He said: “We cannot afford to see collateral damage among Britain’s SMEs as a consequence of banking reform. While there is clearly a need to ensure our banking system is robust, we must ensure that new regulations, however desirable in principle, do not inadvertently derail the recovery or hinder businesses’ access to finance. We support the broad aims of ring-fencing in strengthening the UK’s banking system. Delaying the implementation of ring-fencing until 2019 is a welcome step, given the real concern that it may limit banks’ ability to lend to growing businesses. However, the unilaterally high capital ratios proposed by the report could weaken growth over the medium term and damage an industry with good growth prospects where the UK has a comparative advantage.  

“The need for more competition in banking services, particularly for SMEs, has to be a major priority. The existing divestments are a welcome step but there is more to be done. Improving competition would mean better terms and conditions for business, and would in time drive down business costs. The report includes welcome recommendations on improving switching services for customers. If it is easier for businesses to switch between providers, banks will place a premium on good service to SME customers. However, we believe these proposals could go further – for example, allowing businesses to take account numbers when switching between providers.”

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