UK banks say COVID-19 relief slowed by lack of full state loan guarantees

LONDON (Reuters) – Delays in offering full state guarantees on COVID-19 relief lending hampered the ability of banks to provide fast financial aid to companies in the first phase of the coronavirus pandemic, senior British bankers told lawmakers on Monday.

Banks have come under fire from the Bank of England and the general public for not providing loans to companies fast enough as a national lockdown shutters swathes of an economy heading for deep recession.

The chief executives of commercial banking at domestic lenders Lloyds Banking Group and Royal Bank of Scotland said the primary reason relief lending was faster in countries like Germany and Switzerland was due to 100% state guarantees offered from the onset of the crisis.

“The key difference … is that some of the other European schemes had a 100% government guarantee from Day One,” Lloyds’ David Oldfield said.

“That therefore alleviated some of this pressure on banks to do affordability and the viability checks.”

Britain’s government has since launched a new ‘Bounce Back’ scheme to fully guarantee loans of up to 50,000 pounds to very small companies.

The scheme will complement its Coronavirus Business Interruption Loan Scheme and customers who applied for loans under this earlier scheme will be allowed to switch to the new scheme, the bankers said.

(Reporting by Iain Withers, writing by Huw Jones, editing by Sinead Cruise)