Examination of Witnesses (Questions 120-131)|
16 DECEMBER 2008
Q120 Chairman: I was not clear about
the £1 billion and £2 billion. Were you saying you thought
it was going to be £2 billion or you wished it was £2
Mr Ibbetson: This question came
up before, is £1 billion the right number, and I think Mr
Hoyle recognised and challenged this to say, "Well, if £1
billion gets used, then there's an opportunity to refresh and
have another billion". What the right number is, I do not
think anybody knows, but it is very reassuring that there is £1
billion on the table as a first step and I think, if it all gets
used, in many ways that would be good because that is helping
SMEs and, if it all gets used, in a way that is bad because that
is a demonstration of how difficult the environment is, but we
want to see it used.
Q121 Mr Bailey: Rather than take
a whole lot of the Committee's time, is there anything that any
of the other representatives would add to that? No, good. Can
I just go on to the European Investment Fund. If you were in earlier,
you would have heard the business representatives point out that
there were some examples where the banks did not seem to understand
it and indeed were not actually passing it on. Now, I think this
is really only relevant to Barclays at this moment, but, first
of all, what are you doing to help customers access these funds
and, secondly, moving on to the others, is there any chance of
other banks participating in this scheme?
Mr Cooper: I am very clear what
the European Investment Bank facilities relate to. I think there
is a misunderstanding around that in the marketplace. We have
been working with the European Investment Bank for about 14 years
and we have had a good, long relationship with them and I think
we have lent something like £3 billion through them over
that period. First of all, we do not need European Investment
Bank money for liquidity or capital. What the European Investment
Bank is, because it is owned by European governments, is a triple
A-rated bank and, therefore, it has one of best-rated agencies
around and, therefore, is able to raise funds at a slightly beneficial
cost to traditional banks, and actually the European Investment
Bank dictates what they lend that money at to Barclays and other
banks. We then work out the benefit of that cost versus our average
source of funding, and we agree
Q122 Mr Bailey: I am sorry, I may
have misrepresented it, but we are talking about the European
Investment Fund which has been negotiated.
Mr Cooper: By the European Investment
Bank, yes, I am referring to that, so that benefit in cost or
the price of that we pass on entirely to the customer. Now, what
we have been working hard with the Government and with the European
Investment Bank on is to relax its qualifying criteria which were
pretty tough and they are now much more relaxed, dramatically
more relaxed, I would say, and we are passing all our customers
who request to borrow money from us to see that they actually
pass the qualifying criteria. If the qualifying criteria are met,
we pass all our borrowing requests through the EIB, so we are
very pleased to announce that our first one was drawn this week
for a family manufacturing business in Doncaster borrowing £200,000
to expand and they have received the entire benefit of the European
Investment Bank funding by way of a cash-back upfront premium,
which was a couple of thousand pounds, and they have used that
to fund the valuation of their factory, so it is a nice story
and we expect to turn that into hundreds of requests over the
next few weeks.
Q123 Mr Bailey: So that fund is already
being used effectively?
Mr Cooper: Correct.
Q124 Mr Bailey: How well do you think
businesses are aware of its potential?
Mr Cooper: I think it is growing,
so have done a lot of work to make sure all our 2,000 relationship
managers understand it. As I say, even without the customers requesting
it, every borrowing request we get we are putting through that
facility, if it qualifies, regardless of whether the customers
actually request it to be looked at from the EIB perspective.
We are also working with the EIB to get the qualifying criteria
relaxed even further and they are not the quickest in the world,
but we hope to make good progress there.
Q125 Mr Bailey: Would any of the
other representatives like to comment on whether there is any
chance of their participating?
Mr Maltby: Yes, I can comment.
Our expectation is that we will be drawing on these facilities
early in the new year, hopefully as early as January. I think
that the work that has been done to simplify the process and relax
the criteria has been extremely helpful. What I would say, and
it goes back, I think, to your original question, is that one
of the important parts of any of these schemes is that not only
customers understand what the opportunities are, but also our
relationship management teams. I mentioned earlier that our small
firms' loan guarantee lending had increased by 40% and one of
the reasons for that is that we have actually gone on a very intensive
training programme for our relationship managers, so we would
intend to do the similar process when we are able to draw on the
Ms Peacock: We would draw on all
schemes that we are able to draw on; it is as simple as that.
Mr Ibbetson: Yes, we support the
scheme. As, I think, the Chairman mentioned, there is a meeting
today and we would hope for positive news out of that meeting
Q126 Chairman: This is about risk-sharing,
is it not? That is the issue on the table?
Mr Ibbetson: I think it is the
whole arrangement, whether it is risk-sharing or whatever it is.
It is the whole arrangement about what the scheme will be, and
we would hope to be part of that and, as Lloyds, join in the new
Q127 Mr Bailey: What changes have
the banks made as a result of participation in the Small Business
Mr Ibbetson: As a measure of my
age, I guess, I was around the same table the last time it happened!
It is very different this time. The co-operation between the Government,
the banks and the representative bodies is much more co-ordinated
this time, and I think that point was made in the last meeting.
I have to say, I think it is a good networking meeting with positive
actions coming out of it. It is an open meeting, it is a good
dialogue, it is receiving input from the representative bodies,
with solutions from the banks and co-operation from the Government,
and I do think it is working.
Q128 Roger Berry: Finally, credit
insurance and the squeeze on credit insurance, do you think this
is as serious a problem as some are saying and, if so, how should
it be addressed?
Mr Cooper: From my point of view,
is it serious? I think it could become serious. I do not see it
being serious at the moment. To put it into context, we have only
had two examples where we have had to review with the customer
the impact on their facilities as a result of that, so that is
two out of close to a million customers which is a very small
number at this moment in time. I do think that, if an insurer
withdraws, you need to think, both as a bank and as a business
customer, about why that insurance is being withdrawn. Is it right,
therefore, that the business takes on the additional risk of the
supply in fulfilling their obligations? I think that is a very
serious thing to be looked at. I think the other thing too to
help counteract that is that, if suppliers and businesses pay
their businesses, customers and suppliers on time, the need for
credit insurance is actually reduced somewhat, so at this moment
in time I am not seeing it as a serious issue, but it is very
much on the radar though.
Mr Ibbetson: It is being talked
about a lot now and I think it is becoming an issue. I think I
agree, in a way, with Steve, that, if you had this dialogue three
months ago, it would not have been an issue and now it does seem
to be getting a little bit of momentum. It is going to have businesses
looking much more carefully at whom they are dealing with, and
that might have an impact on volumes of business, so I think it
is becoming an issue. I have to say, I am not sure what the answer
is to resolve it and it may be that another government intervention
in due course is worthwhile.
Q129 Chairman: Well, what are the
looming problems which we worry about? What is the next problem
facing the sector of banking for small and medium-sized businesses
in general that we should be worrying about, as a committee?
Mr Maltby: I think there is no
one single issue. I think the issue of falling sales, the issue
of cashflow from large companies that are maybe not paying smaller
companies on time, these are real issues today and they are likely
to continue and, if anything, likely to increase, so I think that
the attention that has been brought through this Committee and,
I think, through other initiatives across the political divide
is important and it is important to actually focus on these issues
Q130 Mr Hoyle: Mr Ibbetson, you touched
on it, the problem of the energy companies and how that has been
damaging businesses. I do not know if the banks have any experience
of that because I know of a company where their energy bills have
gone up 200% and I do not know whether that has been reflected.
Also, is there some good news going to come from the banks next
year, and do you want to share it with us now, or is there going
to be bad news?
Mr Maltby: If I can answer the
first question on energy costs, we recently did a survey of businesses
to find out what their issues were and, for Lloyds TSB customers,
access to credit was sixth behind cashflow, falling income or
falling sales, energy costs, fuel costs and there was one other,
so I think it is a real issue and it is something where, for a
small business, when you see falling sales, one of the things
you want to do is actually manage your costs. Unfortunately, if
one of your costs is energy, which in many cases it is, then actually
they are not seeing those falls, they have not seen the benefits
of the falls in some of the commodity prices, and that is actually
causing real strain.
Q131 Mr Hoyle: Do you think the actors
in the cartel are too powerful?
Mr Maltby: That is not something
Chairman: Sadly, the Government has squeezed
my debate, this Committee's debate, this afternoon on the floor
of the House on precisely this subject with three statements,
but we will be debating these issues later this afternoon and
I look forward to your contribution then. Gentlemen, is there
anything you want to add by way of conclusion or shall we draw
matters to an end there? You are happy. Well, thank you all. We
will keep a watchful eye on you all, and not just you four, but
the rest of your colleagues as well, I can assure you. Thank you
very much indeed.