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British institutions, including banks, have been urged to avoid profiteering from the Coronavirus epidemic and instructed to pass on the advantages of historic stimulus measures to their clients.
Banks warned against profiteering from UK coronavirus crisis https://t.co/bCyxsK5D5a
— Guardian Business (@BusinessDesk) March 25, 2020
The UK banks have been accused of taking advantage of the rise in demand for emergency loans, despite interest rate cuts and major government-backed lending schemes for struggling businesses and firms. The Labour MP, Chris Bryant stated, “The base rate at the Bank of England is now 0.1% but banks like Barclays are charging anything between 7% and 12%.”
He added that said lenders should be offering loans with minimal interest rates of 1% to 4%, depending on the amount of risk, and emphasized banks to 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,” Bryant said.
Rishi Sunak, the Chancellor, announced the provision of state-backed loans of at least £330 billion for UK companies including through an extended Coronavirus business interruption loan scheme offering interest-free loans of up to £5 million for 12 months. In a joint letter, UK banking chiefs were instructed to take all necessary actions to make sure those measures were benefiting households and businesses according to the plan.
“The priority for all of us – banks, building societies, government, and the financial authorities – should now be to take all action necessary to ensure that the benefits of the measures … are passed through to businesses and consumers,” the letter said.
“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.”
The businesses that did not qualify for the government scheme would be offered loans at normal interest rates, according to Stephen Jones, the Head of UK Finance.
However, the CMA warned it would crack down on any business that tried to take advantage of consumers during the outbreak. “The CMA will not tolerate conduct which opportunistically seeks to exploit the crisis,” it said.