UK banks warned against profiteering during Covid-19 crisis
UK banks were formally warned not to take advantage of the coronavirus crisis as they were accused in parliament of profiteering.
Finance Minister Rishi Sunak wrote to the banks, along with Bank of England governor, Andrew Bailey and the interim Financial Conduct Authority chief Christopher Woolard, reminding them of their obligations.
“The priority for all of us – banks, building societies, government and the financial authorities – should now be to take all action necessary to ensure that the benefits of the measures … are passed through to businesses and consumers,” the trio said in the letter.
“This will require a willingness to maintain and extend lending despite the uncertain economic conditions. We must ensure that firms whose business models were viable before this crisis remain viable once it is over.”
Banks, which were bailed out by the taxpayer during the 2008 financial crash, were reminded that action had been taken to allow them to lend more freely to businesses but in recent days it had emerged that some were charging crippling rates on loans, demanding assets as guarantees and enforcing overdraft charges .
In parliament on Wednesday the Labour MP Chris Bryant said banks were taking advantage of the spike in demand for emergency loans, despite the fact that the central bank had cut rates to an historic low of 0.1% and the government had unveiled a £350bn support packages.
“The base rate at the Bank of England is now 0.1% but … banks like Barclays are charging anything between 7% and 12%,” he said.
“We bailed out the banks but it seems banks will be making money hand over fist from these new loans.”
"They’re taking minimal risks and charging exorbitant rates. It looks like profiteering to me."
Mortgage giant Halifax withdrew the majority of its range of home loans, citing a lack of “processing resource” and said it would no longer offer any mortgages with a “loan-to-value” of more than 60% - meaning buyers who are only able to put down a 40% deposit would qualify.
The Coronavirus Business Interruption Loan Scheme was launched by 40 lenders on Monday as part of Sunak's stimulus package. The government will cover 80% of any losses on bad loans to protect the banks and encourage them to lend.