UK should consider 100% state guarantee for small business loans, banks say

LONDON (Reuters) - Britain’s government should consider fully guaranteeing small emergency loans to businesses to speed up processing, rather than requiring banks to take on some of the risk, Britain’s banking industry trade body told lawmakers on Wednesday.

Banks are under pressure to speed up the granting of loans to companies trying to stay afloat during a national lockdown to slow the spread of COVID-19.

Stephen Jones, chief executive of UK Finance, told lawmakers that checking the ability of companies to repay a loan takes time compared with the system in countries such as Germany, where similar loans are 100% state-backed.

The biggest backlog was for loans of less than 25,000 pounds, and issuing these would be faster if the government did not require banks to take on 20% of the risk, Jones said.

Jones said banks were making progress on the backlog, and that loosening the rules would increase the risk to taxpayers.

“I would urge a few more days of patience... before any re-engineering of the scheme is done,” Jones he told parliament’s Treasury Select Committee.

Reporting by Huw Jones and David Milliken