British banks must keep lending to businesses through the coronavirus crisis to ensure viable companies do not fail, the government and Bank of England said, after promising £330bn (€360bn) in loan guarantees.
In a joint letter to the chief executives of major banks, chancellor Rishi Sunak, Bank of England governor Andrew Bailey and the interim chief executive of the Financial Conduct Authority, Chris Woolard, urged them to support the UK economy.
“This will require a willingness to maintain and extend lending despite the uncertain economic conditions.
“We must ensure that firms whose business models were viable before this crisis remain viable once it is over,” they wrote.
Business owners have flooded social media platforms with complaints about restrictions on access to the British government’s Coronavirus Business Interruption Loan Scheme and the pace at which some mainstream banks are supplying emergency credit.
The state-controlled British Business Bank has now opened up the scheme to "/>all lenders who want to participate, subject to an accreditation process, so they too can help customers weather the crisis.
“The industry is committed to supporting the economy through this temporary shock to the fullest extent, and has the capacity to assist viable businesses with their cash- flow and investment needs,” Stephen Jones, chief executive of trade body UK Finance, said.
“Lenders are working hard to provide the required funding to these firms as soon as possible,” he said.
Last week, Mr Sunak said the UK government would guarantee £330bn of bank lending to business, and the Bank of England will buy debt known as commercial paper from big companies that had an investment-grade credit rating or equivalent before the crisis.
The UK government said earlier this week businesses with sales up to £45m should be able to get 12-month interest-free loans of up to £5m from banks. The latest letter told banks it should be a priority to take all action necessary to enable this. The UK government will guarantee 80% of the money lent.
Banks were expected to support all types of firms, not just those covered by Bank of England and government schemes introduced so far, for example by extending overdrafts or allowing businesses to defer loan repayments, said the Treasury, Bank of England and the Financial Conduct Authority.
“We also appreciate your efforts to ensure that any flexibilities extended to customers at this unprecedented time are recorded accurately so as to prevent an adverse impact on a customer’s credit file,” they said.
In Ireland, business group Isme has again called on the authorities here to provide Irish small firms with zero-interest rate loans to get them through the crisis.