UK banks falling short of coronavirus national interest
(26 March 2020 – United Kingdom) In the wake of the coronavirus pandemic, British banks have been accused of taking advantage of vulnerable business customers in an attempt to profiteer.
Although the Bank of England (BoE) cut base rates to a historic low of 0.1 percent, commercial banks are still reportedly charging anything between seven and twelve percent. State-backed loans of at least £330 billion for British companies have already been announced, including an extended coronavirus business interruption loan scheme offering interest-free loans of up to £5 million for one year.
UK Finance Head Stephen Jones contended that businesses that did not qualify for the government scheme would be offered loans at normal rates. Vanilla small business loans were not tied to the BoE’s base rate and instead “depend on a number of factors including the lender’s funding costs, credit risk charges dependent on loss probability plus operating costs incurred by lenders through the life of the loan”. “Our interest rates are in line with industry standards” Barclays released a statement.
“Lenders should be offering loans with interest rates closer to one to four percent, depending on risk. Banks should take into account how many of their new loans would end up being government-backed if borrowers failed to pay. They’re taking minimal risks and charging exorbitant rates. It looks like profiteering to me” stated Labour MP Chris Bryant.