FCA: Banks must treat small firms fairly
The UK Financial Conduct Authority (FCA) has told lenders that they must improve their treatment of small and medium sized firms during the cost of living crisis.
The independent financial services regulator issued the warning after finding ‘repeated instances’ of poor practice among banks.
In a letter to banks, FCA Executive Director for Consumers and Competition Sheldon Mills said: “We were disappointed to find repeated instances of these customers not being treated fairly by banks when they’re struggling.”
He continued: “We expect the whole sector to act quickly to improve this. We will take action if problems continue.”
Some of the failings included a lack of training and poor record keeping, as well as a lack of clear policies to help banks identify and support vulnerable businesses.
The intervention comes after a Bank of England report showed that SMEs now have lower cash reserves and higher levels of debt than before the pandemic.
The report found that at least 70% of SME debt was outside of government loan schemes and that many businesses would be exposed to interest rate increases.
Mills said: “Given the current pressures placed upon SMEs due to the adverse impacts of Covid 19 and the cost of living crisis, it is crucial that firms consider how they will ensure fair customer outcomes.”
Rising prices also pose a significant threat to the nation’s businesses.
A recent report from the British Chambers of Commerce found that 65% of firms are expecting prices to rise further in the next three months, with 82% of firms citing inflation as a growing concern for their business.
When asked which factors were driving price rises, 67% cited utility bills, 66% said labour costs, 56% fuel and 53% raw materials.
David Bharier, Head of Research at the British Chambers of Commerce (BCC), said:
“Inflation remains by far and away the top concern, with our survey measures going beyond anything we've seen before in the history of the data.
“Businesses face an unprecedented convergence of cost pressures, with the main drivers coming from raw materials, fuel, utilities, taxes, and labour. The continuing supply chain crisis, exacerbated by conflict in Ukraine and lockdowns in China, has further compounded this.”
Muhammad Dar, Practice Manager at CloudAccountant.co.uk said: “Rising prices are a top concern for small businesses and are contributing to falling business confidence.
“We’re working closely with our small business customers to help them weather strong financial headwinds, but it’s important these firms are backed by lenders. Small businesses are crucial to the economy and should not be forgotten during the cost of living crisis.”
For more information about our software and accountancy solutions for small businesses, speak to a member of the team today. Call: 01625 300 300.