LONDON (Reuters) - Delays in offering full state guarantees on coronavirus relief lending hampered the ability of banks to provide fast financial aid to companies in the first phase of the pandemic, senior British bankers told lawmakers on Monday.
Banks have come under fire from the Bank of England and the general public for not providing loans to companies fast enough as a national lockdown shutters swathes of an economy heading for deep recession.
The chief executives of commercial banking at domestic lenders Lloyds Banking Group (LLOY.L) and Royal Bank of Scotland (RBS.L) said the primary reason relief lending was faster in countries like Germany and Switzerland was due to 100% state guarantees offered from the onset of the crisis.
“The key difference ... is that some of the other European schemes had a 100% government guarantee from Day One,” Lloyds’ David Oldfield said.
“That therefore alleviated some of this pressure on banks to do affordability and the viability checks.”
Britain’s government has since launched a new ‘Bounce Back’ scheme to fully guarantee loans of up to 50,000 pounds to very small companies, but larger loans arranged under existing relief schemes will still only be 80% guaranteed.
Eligible customers who applied for loans under the Coronavirus Business Interruption Loan Scheme (CBILS) will be allowed to switch to the new scheme, the bankers said.
Oldfield said that Lloyds - which has faced criticism for lagging rivals in its provision of CBILS loans - was catching up, but added that the bank had initially found the scheme “painful” to implement.
Banks are expecting “extraordinary demand” for Bounce Back loans, Barclays Bank UK CEO Matt Hammerstein told MPs.
He said Barclays had received 200 applications within the first minute of its launch on Monday and was receiving 35 per minute later in the morning.
Bank bosses said they were concerned about a rise in fraud attacks since the start of the crisis, but added that the increase so far had been small.
Anne Boden, chief executive of digital bank Starling, said online start-ups could help deliver the neccessary relief to struggling businesses quickly.
“We all have to pull together as an industry to make sure British businesses survive. It’s painful out there, and we’ve got to get those loans out there as quickly as possible.
“Everybody’s desperate to make this work. We have no option, it must work to save our businesses.”
Reporting by Iain Withers, writing by Huw Jones, editing by Sinead Cruise and Louise Heavens