Asked by: Kirsty Blackman (Scottish National Party - Aberdeen North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent comparative assessment his Department has made of the (a) performance and (b) effectiveness of (i) UK business banking regulation and (ii) that of other OECD countries.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The government, along with regulators, are committed to ensuring that UK regulation promotes safe and sustainable financial services, while still allowing room for innovation and continually reviews its effectiveness.
It has long been the case in the UK that business lending is generally not subject to regulation – much like many other major economies such as; the US, Canada, and Australia. Ultimately, the government only looks to regulate where there is a clear case for doing so, in order to avoid putting additional costs on lenders that would ultimately lead to higher costs for business customers.
But of course, that does not mean – should things go wrong - that businesses do not have access to free, independent dispute resolution services. In fact, 99% of businesses have recourse to the Financial Ombudsman Service. And with the launch of the Business Banking Resolution Service in February this year, larger eligible SMEs also have somewhere independent to take their complaint.
Asked by: Kirsty Blackman (Scottish National Party - Aberdeen North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment his Department has made of the adequacy of business banking regulation during the covid-19 pandemic.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The government, along with regulators, are committed to ensuring that UK regulation promotes safe and sustainable financial services, while still allowing room for innovation and continually reviews its effectiveness.
It has long been the case in the UK that business lending is generally not subject to regulation – much like many other major economies such as; the US, Canada, and Australia. Ultimately, the government only looks to regulate where there is a clear case for doing so, in order to avoid putting additional costs on lenders that would ultimately lead to higher costs for business customers.
But of course, that does not mean – should things go wrong - that businesses do not have access to free, independent dispute resolution services. In fact, 99% of businesses have recourse to the Financial Ombudsman Service. And with the launch of the Business Banking Resolution Service in February this year, larger eligible SMEs also have somewhere independent to take their complaint.
Asked by: Kirsty Blackman (Scottish National Party - Aberdeen North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment his Department has made of the (a) costs and (b) risks to UK businesses of Government covid-19 loans from banks and other authorised lenders.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The government guarantee loan schemes have provided a lifeline to thousands of businesses, supporting over £79 billion in funding. There are robust rules in place that set out how accredited lenders must behave, including treating borrowers fairly.
The government has always been clear that these are loans to be repaid, and that they may not be the right answer for all businesses. That’s why our varied package of support also includes grant funding and tax deferrals.
Asked by: Kirsty Blackman (Scottish National Party - Aberdeen North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the implications for his policies of the profits made by banks and authorised lenders from providing finance under government covid-19 loan schemes.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
Under the rules of our guarantee schemes, accredited lenders are required to pass on to borrowers the benefit of the guarantee in their pricing, reflecting the reduced credit risk provided by the government guarantee.
To provide further protection, under the Bounce Back Loan Scheme the government fixed interest rates at 2.5% for all borrowers. Under the Coronavirus Business Interruption Loan Scheme , the government imposed a cap on interest rates at 14.99% - although the vast majority of loans saw interest rates well below this cap.
Asked by: Kirsty Blackman (Scottish National Party - Aberdeen North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will take steps to strengthen the system of accountability in the financial sector to ensure that banks are accountable for financial misconduct in (a) the UK and (b) overseas.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The Government is committed to ensuring that the interests of businesses and individuals who use financial services are protected.
In response to the banking crisis and significant conduct failings, Parliament passed legislation leading to the Financial Conduct Authority and the Prudential Regulation Authority applying the Senior Managers and Certification Regime. This regime aims to reduce harm to consumers and govern market integrity by making individuals more accountable for their conduct and competence.
Additionally, the FCA has been given a strong mandate to stop inappropriate behaviour in financial services, and the Government is confident they have the appropriate tools to protect consumers, including powers to ban or restrict products; powers of disclosure; power to take formal action against misleading financial promotions; and a power to accept super-complaints from consumer bodies about competition and consumer problems.
The Chief Executive of the FCA has set out his plans to transform the FCA into a more assertive regulator; testing the limits of its powers and working with other agencies to ensure they bring their own powers to bear, to ensure consumer protection and market integrity.
Asked by: Kirsty Blackman (Scottish National Party - Aberdeen North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the changes by the major banks to interest charges on personal overdrafts relative to levels before the covid-19 outbreak.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The pricing of financial products, including the interest rates charged on overdrafts, is a commercial decision for firms and the Government does not seek to intervene in, or make assessments of, such decisions.
In April 2020, the Financial Conduct Authority (FCA) required firms to have implemented new rules governing how they can charge for overdrafts. These included mandating that firms cannot charge more for unarranged overdrafts than arranged overdrafts, banning fixed daily and monthly charges, and a package of measures to improve the transparency of pricing. FCA analysis found that 7 out of 10 overdraft users would be better off or see no change to their overdraft costs as a result of the FCA’s rules.
In response to the Covid-19 pandemic, the FCA announced a series of temporary proposals to provide emergency support for consumer credit customers who were facing short-term cash flow problems as a result of the Covid-19 outbreak. On overdrafts, firms were expected to provide up to £500 interest free buffer for customers, if requested, and make sure that customers did not see increased overdraft fees.
In September 2020, the FCA announced updated guidance to ensure that firms continued to provide tailored support for users of consumer credit and overdraft products who continue to face payment difficulties due to Covid-19. Where a customer needs further support, firms are expected to use measures such as reducing or waiving interest, agreeing a programme of staged reductions in the overdraft limit, or supporting customers to reduce their overdraft usage by transferring the debt.
In 2022, the FCA will carry out a post-implementation evaluation of the remedies it introduced on overdrafts.