On 8 May 2024, the House of Commons Treasury Committee published a report on the issue of access to finance for small and medium sized enterprises (SMEs) and what can be done to help these businesses grow.

The report outlines how the current difficult small business environment – caused partly by increasing de-banking of SMEs and ineffective recourse for bank disputes – is disincentivising risk taking, innovation and growth. It also warns that the Prudential Regulation Authority’s (PRA’s) introduction of the Basel 3.1 standards risks tightening conditions for SMEs even further.

It recommends that:

  • Any more stringent capital requirements for SMEs (as currently planned by the PRA) should be abandoned.
  • The Government must find a way to support the 55,000 SMEs currently served by the Business Banking Resolution Service, which the Committee says has been ineffective and perceived as lacking in independence, and should close as planned. Finding an alternative route to complain about treatment from their bank is particularly important for SMEs above the Financial Ombudsman Service (FOS) turnover thresholds and a consultation on a new mechanism should take place by year end 2024.
  • The Financial Conduct Authority (FCA) must provide clearer instructions on the use of ‘risk appetite’ and ‘reputational risk’ criteria.
  • HM Treasury’s recently announced rule changes, to provide greater transparency when business accounts are closed, should be implemented by summer 2024.
  • The Government must conduct annual assessments of the effectiveness of the British Business Bank – the Committee notes that it plays an important and positive role but awareness of it and its schemes is too low.
  • The FCA must also use its announced review and existing powers to tighten rules around any misuse of personal guarantees and provide the FOS with the appropriate remit to address related business complaints.