In the wake of the financial crisis, the role of banks in lending to SMEs has come under scrutiny, with the contraction in SME lending giving substantial cause for concern. Whilst RBS is still the leading lender to UK SMEs, as the bank faced its own challenge to survive the crisis its lending to SMEs has contracted faster than at other banks.
In this context Sir Philip Hampton, Chairman of RBS Group, requested Sir Andrew Large and management consultancy film Oliver Wyman conduct an independent review into RBS’s SME lending. This review had two broad objectives: to identify the steps RBS can take to enhance its support to SMEs and the economic recovery whilst maintaining safe and sound lending practices; and to promote a common understanding of the way in which RBS makes its judgments and decisions on SME lending.
The Large Report was released in November last year and made a series of recommendations across nine thematic initiatives which, if enacted in full, should lead to more lending to SMEs by RBS; an improved perception of RBS amongst customers and stakeholders; and a greater understanding of the issues surrounding the financing of the SME sector.
Earlier today, the Treasury Select Committee heard evidence from Sir Andrew about the relative failure of SME lending performance by RBS. In my questions, I focused on the extent to which the SME lending problems at RBS were caused by a failure of senior management, and the difficulties my constituency businesses have experienced in having lending approved. For instance, I spoke recently to a very cash flow positive business that cannot get a loan from any bank, versus an asset-rich business that can – they worry that there is a skew in the credit-scoring process towards physical assets as collateral, as opposed to cash flow type businesses.
It was disappointing to learn that, due to organisational fragmentation within RBS, there was nobody with overall responsibility for seeing that the objective of supporting the SME sector was met. I am hopeful that the recommendations of the Large Report will rectify this.