Finance Wales Not 'Fit for Purpose', Claims Report; Finance Wales Accused of Charging 'Exorbitant' Rates

Western Mail (Cardiff, Wales), November 13, 2013 | Go to article overview

Finance Wales Not 'Fit for Purpose', Claims Report; Finance Wales Accused of Charging 'Exorbitant' Rates


Byline: Sion Barry Business Editor sion.barry@walesonline.co.uk

ADEVELOPMENT Bank for Wales, combining the current funds of Finance Wales and Welsh Government business support, should be set up, according to a review into the availability of finance to SMEs.

The second report in the Access to Finance Review, commissioned by Business Minister Edwina Hart and written by Professor Dylan Jones-Evans, concludes that the Welsh Government's banking subsidiary Finance Wales is "not fit for purpose" having been charging interest on loans to SMEs at levels much higher than required under EU state aid rules and its reference rate - which sets levels at which state-owned banks can lend without effectively undercutting private lenders.

After receiving the report Mrs Hart told AMs that she is launching a short consultation before making a detailed response to the report's findings.

Speaking in the Senedd she said she had full confidence in the board of Finance Wales and its chairman Ian Johnson, but there were complicated issues to be considered around state aid rules.

Following the publishing of the report FSB Wales called on executives at Finance Wales, whose chief executive is Sian Lloyd Jones and investment director is Peter Wright, to appear before a committee of AMs to explain what it described as its "exorbitant" interest rate regime.

As well as looking at bank funding to SMEs in Wales and other sources of finance - and concluding there is still an annual funding gap to Welsh SMEs of around PS500m - Mrs Hart asked Prof Jones-Evans to examine in detail whether Finance Wales' interest rate charges were too high following his first report published in the summer.

He has now concluded that interest rates charged Finance Wales are at variance to the Welsh Government's stated key economic development aim of looking to support job creation in the economy and that a lower rate regime would prove less of a drain on cash-flows, so allowing firms in receipt of loans to invest more in capital and staffing levels.

Prof Jones-Evans said the Welsh Government should now consider setting up a Development Bank for Wales; making more effective use of EU rules so interest rates charged by Finance Wales could be significantly reduced from the current spread of 8-12% a year - depending on the risk profile of the business seeking debt finance which is repayable over a five-year period.

The report highlights that while the cost of high street bank lending to businesses has fallen significantly, the spread between what Finance Wales could charge on debt without breaching the EU reference rate has widened markedly since the financial crisis in 2008.

The report says that Finance Wales has also failed to use the positive impact of the de minimis rule that could allow Finance Wales, as a stated-owned bank, to offset interest rates to firms by up to [euro]200,000 over three years without being deemed state aid. In theory de minimis, which applies to the whole of Wales, could provide for the provision of interest-free loans.

The report also says Finance Wales could use rules allowing a reduction on interest charged to SMEs in the convergence area of Wales.

Prof Jones-Evans says: "According to the data submitted to the review Finance Wales is offering higher rates of interest on borrowing to SMEs within Wales than it needs to under EC state aid guidelines.

"The evidence gathered also suggests that Finance Wales has not utilised the full range of financial instruments available under EC regulations.

"For example, with two-thirds of Wales qualifying for the highest level of aid [convergence funding] General Block Exemption Regulation could have been used to subsidise the interest rates on loans to hundreds of SMEs and been a significant policy for Welsh Government.

"In addition, there is no state aid impediment to Finance Wales offering loans to the vast majority of micro-businesses under de minimis regulations if it so wished. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Finance Wales Not 'Fit for Purpose', Claims Report; Finance Wales Accused of Charging 'Exorbitant' Rates
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.