Banks investigated over claims they mistreated SMEs

Ministers including the Shadow Business Secretary Chuka Umunna have called for a full scale government investigation into claims that banks misused taxpayer funds, allocated through the Enterprise Finance Guarantee (EFG) and the Small Firms Loan Guarantee Scheme.  According to the Times, the SFO’s has not decided whether to launch a formal investigation, but has said that it is “looking into” the allegations. A spokesperson said: “We’re aware of this issue and are monitoring developments.” Introduced in 2008, the EFG issues 75% guarantees to banks that agree to lend to small business that would otherwise struggle to secure finance. The guarantee, however, only covers the bank’s liability and critics have claimed that many small businesses were missold the loans without sufficient  explanation. Others have suggested that banks have treated EFG as a cynical move to shift risk for unstable SMEs to the taxpayer, whilst at the same time removing lifelines like company overdrafts.

“The business secretary should order his Department to urgently carry out a full and comprehensive investigation into these allegations to determine whether there have been abuses and to give the public comfort that taxpayers’ money is not being misused,” said Umunna, commenting on the update. “No doubt the business department will draw on any findings the SFO makes in any investigation it carries out into alleged misuse of the scheme.”