Memorandum from Lloyds Banking Group (WM
12)
LLOYDS BANKING GROUP SUPPORT FOR BUSINESSES
1. INTRODUCTION
1.1 We welcome this opportunity to submit
evidence to the Committee on this important issue. Section 2 is
a brief overview of major initiatives that we have undertaken
to assist small businesses. Section 3 provides a brief summary
of commitments to small businesses made by Lloyds Banking Group,
following Government initiatives and schemes.
1.2 The main focus of this written evidence
is to provide information about support provided specifically
to Small Businesses.
2. LLOYDS BANKING
GROUP INITIATIVES
FOR SMALL
BUSINESSES
2.1 Given the current economic challenges,
there has understandably been political, media and public concern
about banks' lending policies and particularly how this impacts
SMEs.
2.2 It is important to recognise that in
the UK there is now a lending gap. Foreign banks and non-bank
institutions have withdrawn from the market and retrenched to
domestic markets. Over the last 10 years, these institutions accounted
for around half of new corporate loans and approximately 45% of
mortgages.
2.3 Lloyds Banking Group has no desire to
reduce its support, either financially or in our level of relationship
support. We wish to grow our market share of this important sector
and Lloyds TSB remains absolutely committed to supporting SMEs
as set out below:
— Lloyds TSB grew lending to SMEs by approximately
20% in 2008.
— We have continued to increase overdraft
limits during the past 12 months (now 6% higher than one
year ago).
— Customers have increased their use of
overdrafts during the past 12 months (over 10% higher than
one year ago).
— Across our portfolio, over 40% of the
value of overdraft limits remains available for further drawdown.
This indicates that there remains a significant level of credit
available to SMEs to assist their day to day cashflow requirements.
— Continuing the availability of undrawn
facilities on overdrafts has capital and cost implications. However,
we are committed to keeping overdrafts available to ensure cashflow
flexibility exists for our SME customers.
— We have not moved businesses from Base
Rate linked overdrafts to LIBOR based overdrafts.
— We were the first UK bank to commit to
pass on, in full, the November and December Bank of England base
rate reductions to SME customers.
2.4 We actively promote our relationship
banking approach, and, as part of this, launched our six point
charter for small businesses last December:
THE LLOYDS
TSB CHARTER FOR
SMALL BUSINESSES
1.Future reductions in base rate in 2008 and
2009 will be passed on in full to Lloyds TSB Commercial's
customers
2.Lloyds TSB will not change the price or availability
of overdrafts during the period of a customer's agreement (typically
12 months) as long as their accounts are maintained within
agreed terms and limits
3.Lloyds TSB will agree to any reasonable request
for short term finance and do what we can to support any viable
business through temporary difficulties.
4.On renewal of an overdraft facility, Lloyds TSB
will only change the limit or the price if the risks associated
with that customer have changed materially
5.Small business borrowing will not be switched from
base rate to LIBOR
6.Lloyds TSB will host a series of 120 business
advice seminars across the UK to provide expert guidance and support
for small firms and to strengthen local networks of business professionals.
2.5 Lending is of course only part of the
service that we provide and we believe it is equally important
to ensure that our local managers keep close to their customers
and provide help and guidance to put them in the best position
to weather the downturn. Through collaboration with business support
agencies and other professionals, we're committed to supporting
our customers:
— Our 1,400 relationship managers
are based in 500 local business centres across the UK. The
relationship managers are essential in helping customers. They
have a network of contacts with business support organisations
and other professionals who can help our customers with advice
that help them weather difficult times.
— We provide numerous customer guides on
our website covering business skills, such as "Managing your
Business" and "Financing", including specific advice
on "Planning for uncertain economic conditions". We
also publish our six monthly "Business in Britain" survey
sharing insights and trends from thousands of companies. In addition,
we highlight support available externally such as the Business
Link website and have built links to BERR's own cashflow guides.
— Lloyds TSB Commercial is fully committed
to the Business Banking Code and applies the requirements of the
Code to all of its customers with a turnover of up to £15 million,
rather than just businesses with a turnover of up to £1 million.
3. LLOYDS BANKING
GROUP COMMITMENTS
AS PART
OF GOVERNMENT
INITIATIVES
3.1 As part of the October 2008 Government
recapitalisation, we made several commitments including to maintain
the availability of mortgage and SME lending products at 2007 levels.
We were fully supportive of this as it is absolutely aligned to
our commercial objectives—and we are lending more than in
2007.
3.2 We have shared comprehensive data with
UKFI covering our adherence to the commitments and UKFI has confirmed
they are comfortable that we are meeting those commitments.
3.3 Lloyds Banking Group also made commitments
to lend as part of the part of Government's Asset Protection Scheme
(APS) we have committed to lending an extra £14 billion
(£3 billion in retail mortgages and £11 billion in business
lending). This will be lending to credit-worthy borrowers within
our current lending criteria and on commercial terms.
3.4 Lloyds TSB was fully committed to the
Small Firms Loan Guarantee Scheme, and following the relaxation
of SFLG criteria in March 2008, we increased our new take up SFLG
by 41%.
3.5 SFLG has now been superceded by the
Enterprise Finance Guarantee and we remain one of the most active
banks in the scheme.
4. CONCLUSION
4.1 We have experienced unprecedented market
dislocation across the world in recent months, but despite this
have been in a position, partly due to the prudent decisions taken
by Lloyds TSB, and partly due to our participation in Government
schemes, to be able to continue supporting SMEs.
4.2 Historically, Lloyds TSB was able to
maintain its support to customers, in particular mortgage customers
and SMEs, through its strategy of maintaining customer relationships
throughout the economic cycle—good times and bad.
4.3 As we enter a more challenging period
for the economy and after its recent recapitalisation, Lloyds
Banking Group will continue to support its customers during this
difficult time, ensuring that they have access to the finance,
products, advice and relationships that they require.
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