The House of Commons’ Treasury Select Committee has published the terms of reference for its inquiry into the state of the small and medium-sized enterprise (SME) finance market.

The inquiry will consider the state of the SME finance market under the following themes:

  • funding options available to SMEs. This includes: (i) the availability and update of different sources of funding for SMEs, including banks, peer-to-peer lenders and crowdfunding; (ii) the level of competition in the SME lending market and the impact of recent regulatory initiatives; (iii) trends in SME finance and how potential changes to regulation and redress may affect the market; and (iv) any sources of finance which SMEs will not consider or approach and why;
  • the ability of SMEs to resolve disputes and access fair and reasonable compensation when they borrow money. This includes: (i) the effectiveness of existing arrangements for dispute arbitration and settlement; (ii) the merits of the FCA’s proposals for expanding SME access to the Financial Ombudsman Service (FOS); (iii) the case for establishing a new tribunal body for settling SME banking disputes and the means by which such a body could be created; (iv) the design, governance and operation of such a tribunal body, and the potential relationship between it, the FOS and the FCA; and (v) the impact of additional avenues for redress or the on: (a) the balance of power between SMEs and lenders; and (b) the supply of, and demand for credit; and
  • the regulation of SME lending. This includes: (i) the level of protection currently afforded to SMEs when they borrow money; (ii) the case for bringing lending to SMEs within the regulatory perimeter including: (a) the likely impact on the supply of and demand for credit; and (b) lessons learned from past misconduct; and (iii) other non-regulatory or quasi-regulatory options for policing SME lending such as the establishment of industry codes and standards.

View Treasury Select Committee SME finance inquiry terms of reference, 20 February 2018