Are Banks engaging in Buck Passing To blunt Lending Row ?
News this morning that Britain’s six biggest banks have asked a credit reference agency to report on the creditworthiness of their customers in a bid to dampen Government criticism of lending levels smacks a little of buck passing to me. The potential argument when the banks meet with Treasury officials in October could be something like ” Its not just us that says these SMEs are not viable borrowers- see what this credit agency says about them as well!”
As a Managing Director of a commercial credit agency myself, I know that one of the biggest jobs we have in the credit information world is to satisfy the needs of credit granters when reporting on small businesses. That’s because there is a dearth of readily available credit information upon which to make credit recommendations. Private businesses don’t have to file any information about themselves at any government agency, while small limited liability companies have been filing less and less information at Companies House over the last decade due to more liberal legal filing requirements. This absence of information generally tends to produce more negative credit scores for smaller businesses- it’s a fact of life. The banks, being large users of credit information themselves, know this fully well. Call me a little cynical, but I suspect that when the credit agency employed by the six major banks comes back in a month’s time with its conclusions, it will do no more than to support the view already held by the banks i.e. they’re willing to lend, but there are fewer viable SME borrowers out there to engage with. Surprise surprise!!