RBS' access to credit debate

RBS eases credit access

Criticism over how UK taxpayer-backed Royal Bank of Scotland (RBS) is helping small businesses obtain credit has led the ailing firm to dramatically improve its borrowing terms today. The bank hopes that relaxing the rules will highlight how the firm is leading the way in credit access.

Currently 70 percent-owned by the UK-taxpayer, RBS has today announced plans to cap overdraft charges at 1.5 percent for any business with a turnover of up to GBP£25 million (27 million euros). The move will impact 1.2 million small business customers.

In addition, the firm will also offer free banking for all business start-ups. Previously only companies banking with NatWest were offered free banking. According to a press statement from the bank, the move will see RBS funding new companies at a rate of 2000 a week, suggesting that the firm is leading the way among Britain's high street banks in providing access to credit for new businesses.

A spokesman for the bank told reporters: "We are doing as much as we can to let people know that we are open for business," adding that RBS had "GBP£27 billion (29 billion euros) in undrawn overdraft facilities, offered to small enterprises but not taken up."

Big issue

The move has also been welcomed by the employers' organisation the CBI, who last week stressed that the lack of credit had now become Britain's biggest issue since the recession hit last year. According to Director-General Richard Lambert, "the issue is now of more concern than that of bankers' pay and bonuses."

Meanwhile, Stephen Alambritis, head of public affairs at CBI, told UK newspaper The Times, "Businesses need to know that their credit lines are safe and how much they will cost. Commitments to guarantee overdrafts [...] and commitments to transparency are a real help. We want these to make a real difference to the small business sector."

RBS will cap loan arrangement fees for small business customers at 1.5 percent and renew lending on the same or improved terms for at least 12 months. The firm has also committed itself to lending an extra GBP£16 billion (17.5 billion euros) to small businesses. Reports show that in the nine months to the end of September, it lent GBP£28.5 billion (31.2 billion euros).

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