Banks have come under fresh fire from MPs for starving firms of much-needed credit while being propped up by billions of pounds from the taxpayer.
The Treasury select committee’s latest report said there was an “unresolved inconsistency” between the assurances of bank bosses and complaints on the ground from struggling businesses over a lack of lending.
MPs said they were “very concerned” about the scarcity of credit for small firms who were also faced with higher charges and arrangement fees.
“We deplore the behaviour of a number of those banks who have received so much public money and behaved in such an insensitive manner particularly to established customers,” the report said.
The select committee called for a probe into such practices and more detailed lending figures from the banks which have received state support.
Royal Bank of Scotland and Lloyds Banking Group have made lending commitments of £25?billion and £14?billion over the next 12 months in return for insuring hundreds of billions in toxic assets with the taxpayer.
Despite some positive signs in lending trends, MPs were “concerned” about arrangements for monitoring lending levels and said more onerous terms “seem to work against the letter and the spirit” of Treasury agreements.
“There was some doubt, expressed to us during our visits across the country, as to whether these banks were achieving these lending targets,” the report said.
The Government has also announced a plethora of schemes to support businesses in the downturn including a £20?billion working capital guarantee scheme, and £1.3?billion enterprise finance guarantee scheme.
But the committee heard anecdotal evidence criticising the operation of the enterprise finance scheme and said the Government’s current approach was “piecemeal and disjointed”.
“It is difficult to form an overall picture of how effective those efforts are, and how well they are working together,” the report said.
The MPs welcomed the Government’s move to impose conditions on banks in return for public support but added there were “conflicting pressures” between boosting their finances and lending more.
“There is an inherent conflict between ensuring that the banks maintain high capital ratios, protecting the taxpayer interest and wanting the banks to increase lending levels,” the report said.
MPs also attacked bankers for making “an astonishing mess” of the financial system.