The National Association of Commercial Finance Brokers (NACFB) has urged the Government to intervene to prevent a reduction in lending to small and medium-sized enterprises (SMEs).
The commercial finance broker trade body has sent an open letter to City Minister Andrew Griffith and Kevin Hollinrake MP, calling for action on two separate regulatory frameworks: Basel III regulations and the FCA’s Consumer Duty.
The NACFB has warned that these regulations are likely to impede capital provision, raise funding costs, and cause a divergence in regulatory approaches due to a lack of clarity.
The Association has joined wider calls for greater examination of the unintended consequences of Basel III and urged the Bank of England and the PRA to release supporting data justifying their continued approach.
The NACFB has also called upon HM Treasury to insist that the FCA provides greater clarity on whether the Consumer Duty only applies to regulated products or if it extends to regulated activities supporting non-regulated products.
The Association believes that current definitions leave too much room for differing interpretations, which could hinder the implementation phase.
NACFB chair, Paul Goodman (pictured), has highlighted the urgent need for action, stating that both regulatory frameworks as they currently stand will reduce access to finance for the UK’s small business borrowers in the immediate term. He emphasised the “very real short-term impacts” that inaction will bring.
Lending volumes grew in 2022, with challenger and specialist banks accounting for a record share of gross lending. The NACFB has warned that these institutions could now face punitive measures that will likely increase borrowing costs and reduce market competition.
The Association’s call for government intervention comes as the UK seeks to support its SMEs, which are the backbone of the economy. The Government has previously introduced measures such as the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) to support small businesses during the pandemic.
However, the NACFB’s concerns indicate that further support may be needed to ensure that SMEs can continue to access finance in the long-term.
