UK Finance and the Lending Standards Board (LSB) have set up a working group to examine fairness of SME lending contracts, in collaboration with the all-party parliamentary group (APPG) on fair business banking.
The working group will make sure participating banks adhere to the LSB’s Standards of Lending Practice when providing finance to SMEs.
Banks that have signed up to the group so far include RBS, Lloyds, Barclays, HSBC, Santander, Clydesdale and Triodos UK.
The group’s operations will be headed by Momentous Change, a consultancy led by former APPG vice-chair and Scottish National Party MP Michelle Thomson, whose career includes a stint as RBS programme manager in 2006-2007.
The group will also consult with other organisations, including the Chartered Banker Institute, the Federation of Small Businesses and SME Alliance.
“Clear, understandable and fair contracts are the foundations of trust between SMEs and finance providers, allowing SME customers to compare offers and terms across providers,” UK Finance said.
Low transparency of contracts was one of the main findings of the Financial Conduct Authority (FCA)-commissioned review into RBS’s treatment of SME clients.
The RBS case resulted in higher scrutiny of the business banking sector on part of policymakers, watchdogs and lobby groups.
Two parliamentary committees have launched a joint review into SMEs’ access to finance, while the FCA is looking into giving SMEs access to the Financial Ombudsman Service (FOS), currently open only to consumers and micro-businesses.
UK Finance has also commissioned a review of the state of alternative dispute resolution services, which are intended to deal with cases that escalate beyond customer complaints but may not be suitable for court.