Merlin should mean less tax and regulation, says Bottley
Less tax and regulation is needed if the banking sector is to start lending again to small businesses. That’s according to Stephen Bottley, partner at DLA Piper in Birmingham, who spoke to Insider as the government announced Project Merlin. Under the new scheme, banks will lend about £190bn to businesses this year - including £76bn to small firms – and reveal some salary details of top earners.
Three of the big four – HSBC, Barclays, and Royal Bank of Scotland – have put their names to Project Merlin, and Santander has agreed to the lending parts of the deal.
Alongside this comes £200m of capital for David Cameron's Big Society Bank, which is aimed at financing community projects.
Speaking about the rise in the bank levy, Stephen Bottley, partner in the finance and projects team at DLA Piper Birmingham, told Insider: "The government's announcement that it will increase the levy on banks to £2.5bn this year, raising an extra £800m, has created a highly polarised response in the market.
"The figures themselves may not even appear very significant compared to the value of bonuses we see in the bank sector. The strength of reaction seems to be more around the symbolic attitudes embedded in the statement."
Bottley said the big four banks were thought to be 'livid' and appear to feel that the levy acts as a punishment. Trade union Unite has said the sum is a 'pittance' and want the financial services sector to be held more to account.
Bottley added: “Small businesses are crucial to the economy and to market innovation. As a country, we need to ensure support for SMEs who have been struggling due to lending restrictions. However, the main issue preventing banks lending to businesses or consumers is the fact that they cannot rely on being able to borrow from each other to fund new lending.
"All the major players are working towards improving this, but until inter-bank lending frees up businesses will continue to find difficulty in accessing finance. It is also understandable that recent experiences have led the banks to view smaller businesses as being higher risk. In fact they were heavily criticised for not doing a strict enough risk assessment on their lending portfolios.”
Speaking about Project Merlin, business secretary Vince Cable said: "Today's agreement is a good step forward for British business. Banks have made a commitment, with independent monitoring, to increase credit to UK firms and especially to small and medium sized enterprises.
"Tougher mandatory disclosure rules covering the top eight executives outside of the board will give the UK the most transparent financial regime in the world, while linking executive pay to lending gives businesses a crucial assurance that bank executives have a stake in the real economy.”
