The government is now on the verge of forcing a referral system upon the high street banks.
After months of speculation and gathering traction, Louise Armistead of The Telegraph reports that the legislation required to usher in an SME referral system will be included in the Queen’s Speech next week. George Osborne and Vince Cable appear to be pushing forwards with the plan in spite of intense opposition from the banks. The plan is to force banks to refer the businesses that they reject for loans onto alternative finance providers. The proposed move is expected to disrupt the dominance of the high street banks within the small business lending market.
At the AltFi Summit this year on March 11th, Vince Cable stated:
“How do we encourage/make the banks do referrals? I personally am quite well disposed to the idea of requiring banks to make an onward reference.”
Shortly after the conference, the Chancellor George Osborne declared that he was investigating the idea of imposing a mandatory demand on banks to recommend alternative finance providers to customers. The Treasury subsequently launched an investigation, which closed a few weeks ago.
The banks have reportedly warned the Government that the implementation of legislation of this kind will be both complex and costly for them. They are said to be lobbying hard to get the proposals scrapped in time.
All eyes will be on the Queen’s Speech on Wednesday 4th June next week.