Newspaper article The Evening Standard (London, England)

Prof's Bright Idea: A Lender to Help Small Businesses

Newspaper article The Evening Standard (London, England)

Prof's Bright Idea: A Lender to Help Small Businesses

Article excerpt

Byline: Jim Armitage

ONE thing is for sure. The capital controls now being placed on the banks will do absolutely nothing to thaw out the lending crisis that is stifling the small and medium-sized businesses on which this Government pins our nation's future growth hopes.

Whether you think the [pounds sterling]25 billion of extra dosh the banks are now going to have to raise will save our economy from future collapse or merely send more banks and bank workers to Hong Kong and Singapore is irrelevant to these small companies.

What matters to small businesses is that it will mean billions of pounds that would have been lent to them will not now be advanced.

Of course, the regulators will urge banks to raise the funds without crimping lending -- cutting bonuses, perhaps, raising more capital on the markets.

But don't hold your breath.

Lending -- particularly to risky earlier-stage businesses -- will be hit. Given that we, as taxpayers, own large chunks of RBS and Lloyds and hope one day to get our money back, perhaps it is right that higher-risk SME lending will be further curtailed.

But that would be to forget that our bailouts of the banks were intended to prop up not the banks as such, but the economy -- businesses, in other words -- which relies on the banks for their survival. In our hopes of getting our bank shareholdings back into profit, we should never lose sight of that fact.

Enter an idea from bankerturned-academic Peter Hahn. At a time when the Bank of England is making it harder for banks to increase their lending, and politicians are feeling pressured to up the value of RBS's shares on behalf of the taxpayer, he has a novel idea. RBS's chief executive Stephen Hester, pictured, has, on the orders of the European Union, to sell 318 bank branches and, critically, 40 small-business banking centres. There are, according to the leaks, six buyers circling.

Given the experience of Lloyds' Project Verde, it seems unlikely that any of these offers will be worth much. …

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