UK tells banks to keep lending through coronavirus

The Bank of England in the City of London, Britain, December 12, 2017. 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. — Reuters file pic
The Bank of England in the City of London, Britain, December 12, 2017. 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. — Reuters file pic

LONDON, March 25 —  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 today, after promising €330 billion (RM1.6 trillion) 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.

Last week Sunak said the government would guarantee €330 billion 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 should be able to get 12-month interest-free loans of up to €5 million from banks.

Today’s letter told banks it should be a priority to take all action necessary to enable this.

The government will guarantee 80 per cent 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. — Reuters

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