By David Milliken and Sinead Cruise
LONDON (Reuters) – British banks must keep lending to businesses through the coronavirus crisis to ensure viable companies do not fail, the government and Bank of England said on Wednesday, after promising 330 billion pounds ($389 billion) in loan guarantees.
In a joint letter to the chief executives of major banks, finance minister Rishi Sunak, Bank of England Governor Andrew Bailey and the interim chief executive of the Financial Conduct Authority, Chris Woolard, urged them to support the economy.
“This will require a willingness to maintain and extend lending despite the uncertain economic conditions. We must ensure that firms whose business models were viable before this crisis remain viable once it is over,” they wrote.
Anxious business owners have flooded social media platforms with complaints about restrictions on access to the government’s Coronavirus Business Interruption Loan Scheme and the pace at which some mainstream banks are supplying emergency credit.
The state-controlled British Business Bank has now opened up the scheme to all lenders who want to participate, subject to an accreditation process, so they too can help customers weather the crisis.
“The industry is committed to supporting the economy through this temporary shock to the fullest extent, and has the capacity to assist viable businesses with their cashflow and investment needs,” Stephen Jones, chief executive of trade body UK Finance, said.
“Lenders are working hard to provide the required funding to these firms as soon as possible,” he added.
Last week, Sunak said the government would guarantee 330 billion pounds of bank lending to business, and the BoE will buy debt known as commercial paper from big companies that had an investment-grade credit rating or equivalent before the crisis.
On Monday, the government said businesses with sales up to 45 million pounds should be able to get 12-month interest-free loans of up to 5 million pounds from banks.
Wednesday’s letter told banks it should be a priority to take all action necessary to enable this.
The government will guarantee 80% of the money lent.
Banks were expected to support all types of firms, not just those covered by BoE and government schemes rolled out so far – for example by extending overdrafts or allowing businesses to defer loan repayments – the Treasury, BoE and FCA added.
“We also appreciate your efforts to ensure that any flexibilities extended to customers at this unprecedented time are recorded accurately so as to prevent an adverse impact on a customer’s credit file,” they said.
(Reporting by David Milliken and Sinead Cruise; Editing by Alistair Smout and Mark Potter)