MPs to banks: We're watching you

Friday, 24 July 2009 11:04 AM

By Liz Stephens

The potential behaviour of some banks involved in the Enterprise Finance Guarantee (EFG) Scheme is a cause of concern and merits continued supervision of the institutions, according to an influential group of MPs.

The business and enterprise committee warned that while caution by the banks over whom they allowed to access the scheme was understandable, there were cases where banks were denying access to the scheme to businesses that were eligible.

The EFG Scheme was introduced by the government in January to help the flow of credit to small and medium size enterprises.

Baroness Vadera described the scheme at the time as: "To help those at the margins".

However, the government's decision to give the banks the choice of which companies should benefit from the new financial guarantees was criticised as potentially flawed.

The report says: "We understand that the government cannot exercise this commercial judgement itself. However this places a great responsibility on the banks to ensure that those eligible for the scheme benefit from it."

Committee chairman, Peter Luff, said: "While we are largely impressed by the way the EFG scheme has been handled, it depends on banks offering appropriate help to their customers.

"We will be monitoring whether the scheme is being offered appropriately".

The committee called for businesses to submit evidence if they feel they have had experience of being denied access to the scheme by banks.

Tags:
• banking crisis
,
• business and industry
,
• economy