New proposals from the Basel Committee on Banking Supervision, the group that sets global banking standards, will see a rise in the amount of capital that banks are required to hold against certain loans.
In a joint letter to the UK Chancellor George Osborne, the FSB argues that there is a risk that banks will have to significantly increase the cost of lending to small businesses, according to smallbusiness.co.uk.
Small business banking remains worryingly concentrated with the big four banks, controlling 85 per cent of lending to SMEs, adds the organisation.
FSB national chairman John Allan believes the new proposals shouldn’t restrict a businesses ability to grow.
“Our research shows that small businesses are currently in a robust mood. Nearly two thirds of those surveyed signalled a desire to grow, helping to sustain the economic recovery through 2015.
‘But the Basel Committee proposals will make it harder for small firms to access funding and threaten to derail their ambitions for growth.’
These proposals will add another layer of complexity to the raft of bank reforms adopted after the financial crisis, the FSB adds.
Anthony Browne, chief executive of the British Bankers’ Association says it would be unjust for SME’s to lose out as a result of these plans.
“Small business lending did not cause the financial crisis and yet SMEs stand to lose out if these troubling new rules are introduced. The proposals also threaten to make mortgages more costly, creating difficulties for those trying to take their first steps on the housing ladder.
“We want the Chancellor to put pressure on the Basel Committee to rethink these measures before they destabilise the borrowing prospects of our small businesses and first-time buyers.”
