The new governor of the Bank of England has said the UK’s banks need to ‘get on with it’ and be faster in approving emergency rescue loans to businesses struggling to survive during the coronavirus crisis.
‘Notwithstanding the stress that we’re all operating under in terms of the current working environment, they have got to put their backs into it and get on with it, frankly,’ Bailey told reporters during a virtual press conference.
Bailey’s call adds to concerns voiced by Ministers and industry bodies that the new business interruption loans introduced by the Government to help firms survive the crisis are not being approved quickly enough.
Under the coronavirus loan scheme launched last month, small and medium-sized firms borrow up to £5million, where their operations or cash flow has been disrupted by the Covid-19 lockdown and they desperately need money.
This week, the Treasury said the scheme would be extended also to firms which make more than £45million, which were previously denied access to the scheme.
Banks and building societies have received 28,461 applications to the scheme from businesses. They approved 6,016 to date, handing out a total of £1.115billion, according to data by industry body UK Finance released on Wednesday this week.
It said more requests were still being processed and were ‘expected to be approved over the coming days’ as they faced pressure to be faster.
Total lending under the coronavirus business interruption loan scheme has grown by £700million in the past week, UK Finance said.
However, many companies have complained that they were being routinely turned down for the loans, which are interest-free in the first year, and offered the bank’s own, more expensive loans instead.
Bailey said banks had to address the ‘serious strain’ on their ability to process a surge in demand for loans and he suggested they were sticking to risk assessment processes that were too slow.
He also said that the Office for Budget’s responsibility’s projection of a 35 per cent decline in GDP this quarter was ‘not implausible’.
According to the OBR’s projections, unemployment could soar to 10 per cent and the government’s deficit could hit £273billion – the highest level since the Second World War – if the lockdown stays in place for three months.