The chief executive of ING Lease UK, Chris
Stamper, has hit out at the government’s National Loan Guarantee
Scheme (NLGS) as anti-competitive and said the programme’s demise
could be seen as a Treasury response to that criticism.
In a letter to Leasing Life, Stamper
said he agreed with the points made by Peter Collins, chief
executive of MAN Finance, who said the scheme is anti-competitive
because it gives support to UK-based banks and not to other asset
finance providers.
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Since launching the Funding for Lending Scheme (FLS), the
latest credit-easing initiative, the Treasury has effectively
called time on the NLGS as a tool to stimulate lending five months
after it began.
A statement on the department’s website said:
“Changes in market conditions since the introduction of the NLGS
mean that it is now less economical for banks to raise unsecured
funding.
“In practice, this means that banks who are
currently offering NLGS loans are likely to opt to deliver credit
easing to the whole economy through the FLS. It is expected that
banks currently offering loans through the NLGS will, over time,
cease to offer NLGS branded products.”
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By GlobalDataStamper said he welcomed the change and added:
“With the implication being NLGS is now redundant, it is possible
the Treasury took heed of the anti-competitive criticism in
establishing the Funding for Lending programme.”
Through the NLGS, the government guaranteed
£20bn in funding allowing banks to raise funds at a lower cost on
the condition the cost saving was passed on to businesses through
lending.
Stamper wrote to Leasing Life in
response to an article examining criticism of the
NLGS and said: “Not only are captives excluded from the scheme
but it appears that anything other than a UK bank or a direct
subsidiary of a UK bank is excluded from the scheme.
“I would suggest that this probably excludes
something like 60% of the UK asset finance market from the NLGS and
is without doubt anti-competitive.”
Stamper said excluding so many lenders from
the scheme reduced the potential for the scheme to increase lending
volume which a reduction in the cost of borrowing was presumably
designed to do.
A step in the right
direction
Through FLS banks can borrow funding from the
UK’s central bank, the Bank of England, at a lower rate so long as
the funds obtained are used to lend into the economy.
The FLS scheme is open to a wider selection of
banks and building societies than the NLGS guarantee scheme and
leasing is an eligible lending product. However, non-bank lenders
are still excluded.
Stamper said: “Having a scheme that’s open to
all is clearly a better way forward. Making financing schemes
simpler with less complex options from various lenders is also a
step in the right direction.
“We can’t have situations where customers take
the last deal they are offered simply because it’s too complex to
evaluate the options.”
A spokesperson for the Finance & Leasing
Association (FLA) said the body welcomes the inclusion of leasing
but will be lobbying for the scheme to be extended to include
non-bank lenders.
The spokesperson added that, as the FLS
includes wholesale finance, non-bank leasing could benefit
indirectly from the cut-price funding and boost lending as a
result.
A spokesperson for the Treasury told
Leasing Life last month the NLGS was not anti-competitive
because it was designed primarily to tackle to high-cost of raising
funds experienced by banks.
Chris Stamper’s letter to the editor was
published in full in Leasing Life’s August issue and will
be available online to subscribers soon.
