US move helped expose ‘lending deserts’, where banks were routinely refusing to lend money to businesses and individuals
Banks should be forced to publish figures showing their loans to businesses and individuals in different areas of the country to reveal the “lending deserts” where customers are being denied access to credit, Labour has said.
Writing on the Guardian website, shadow ministers Gareth Thomas and Chris Leslie say a similar move in the US helped expose where conventional banks were routinely not lending money – usually in poorer communities – and helped bring in competition from alternative lenders such as credit unions and community banks. They cite the example of Thamesmead, an area of London which has a population of 55,000 and not a single bank branch.
“The banks are not always wrong to reject applications for loans,” they said. “But there are too many tales of reasonable requests being turned down, of staff in remote locations rejecting applications and of the closure of bank branches that once provided serious advice.”
The move, one of several initiatives to emerge from the party’s policy review on banking, comes as the British Bankers’ Association published details of lending by Britain’s major banks to businesses in England, Wales and Scotland in the first three months of this year.
The quarterly figures show lending to small- and medium-sized businesses between the last quarter of 2011 and January-March 2012 fell in all regions except north-east England and Wales. Banks blamed “reduced demand”. Lending by the major banks in London, the highest regional total, was about four times the total in the north-east, which had the lowest aggregate figure.
“The reason behind [compiling the figures] was to see if there were lending deserts and to find out, if there were, how we could best help people in those areas,” said a BBA spokesman.
The BBA said it hoped in future to publish even more detailed data by postcode. Under the Labour proposals, all banks would be asked to publish this data individually, broken down by postcode, said Thomas.
Labour’s review also suggested banks should be made to release standardised details of their fees and penalty charges for bank accounts, loans and credit cards so they can be easily compared.
They should also have to “open up to scrutiny” internal policies on managing risks of investment and interest rate setting decisions, said Thomas, the shadow civil society minister, and Leslie, shadow financial secretary to the Treasury.
“Britain’s major banks are global leaders and a vital source of domestic jobs and tax revenues,” they said. “Greater openness will be part of the solution for reconnecting capital to place and rebuilding the relationship between banks and their customers.”