Griggs to monitor banks loan appeals

SCOTTISH Enterprise non- executive director Russel Griggs is to play a key role in monitoring lending to small businesses, as Britain's five biggest banks yesterday promised greater powers for firms to contest loan decisions.

Griggs has been appointed as independent regulator of a scheme that will allow SMEs to demand their application is reviewed by a second bank representative if they feel they have been unfairly turned down for a loan or overdraft.

The appeals mechanism is part of a "better business finance" campaign by the British Bankers' Association (BBA), which was launched at a low-key event in Edinburgh yesterday.

Royal Bank of Scotland, Lloyds Banking Group, Barclays, HSBC and Santander have all vowed to improve the appeals process for small banking customers.

They have also committed to provide the result of a loan appeal within 30 days and information on alternative sources of finance if it is unsuccessful.

Griggs previously chaired the CBI's SME council and spent ten years at Scottish Enterprise during the Nineties before returning as a board member last year. He will produce a yearly report, with the help of consultancy Promontory, on whether the banks are living up to their promises. His appointment has been backed by the Department for Business and the Treasury.

BBA chief executive Angela Knight said the campaign "represents the banking industry's continued commitment to providing small and medium-sized businesses with the information and support that they need."

However, small business groups reacted with scepticism, pointing out that the banks "still hold all the cards". While the initiative will be independently monitored, small firms had been pushing for an independent appeals board, where their loan application would be reviewed by someone outwith the banks.

Colin Borland, head of the Federation of Small Businesses in Scotland, said: "We would have preferred an independent financial intermediary service - backed up by a credit adjudicator with statutory powers. Those reviewing the processes will need to demonstrate their independence early on if they are to combat the inevitable scepticism."

The BBA launch coincided with the publication of a survey claiming 75 per cent of UK SMEs had seen no improvement in banks' approach to lending since the introduction of "Project Merlin" this year.

Under the project, which the government had hoped would rein in the excesses of the banking industry, banks agreed to lend an extra 10 billion to small firms this year. But a survey of 500 SMEs by online business directory hotfrog yesterday revealed three-quarters felt there had been no change since the crackdown.

The findings back up the Scottish Government's most recent SME access to finance survey, which showed that the number of loan applications rejected outright rose last year.