George Osborne to Force Banks to Promote Alternative Lenders

The Government is preparing to force high street banks to refer small businesses to alternative lenders in landmark legislation to be included in the Queen’s Speech next week (w/c 2 June).

George Osborne and Vince Cable are pushing ahead with plans to introduce the new laws, despite intense opposition from the banks. The rules, which would make it compulsory for banks to automatically pass on customers that they turned-down for credit to alternative lenders, are designed to break open the dominance of high street banks in the small business lending market.

The Treasury, which is concerned that a lack of credit is choking off the recovery and stunting growth among small businesses, is determined to boost the number of alternative lenders in the market.

In his Budget in March, the Chancellor said he was investigating the idea of imposing a mandatory demand on banks to recommend alternative funding providers to customers. The Treasury launched an investigation immediately which closed several weeks ago.

The banks have warned the Government that introducing legislation will be both complex and costly for them to implement. Insiders said they are still lobbying hard to get the proposals scrapped ahead of the Queen’s Speech on June 4.

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