A TOP banker with the Royal Bank of Scotland/NatWest group claims there is enough liquidity in the banking system to help small firms through the recession.

This week, the British Chambers of Commerce (BCC) said not enough of the £200bn injected into the financial system was reaching small and medium-sized businesses (SMEs).

Its latest survey reported that 33% of companies claimed accessing finance had been more difficult over the past three months, a deterioration on the 20% reported in June.

But Peter Ibbetson, chairman of small business banking for the now state-owned RBS/NatWest group, insisted banks did have the money to lend and that the key issue was confidence.

Speaking to LDP Business from the group’s Liverpool city centre corporate office, he said: “The truth is that during downturns businesses tend to de-leverage.

“In the first six months of the year, we lent £29bn to firms but they actually repaid £35bn. In times like these, they prefer to pay back money and lessen their exposure.

“Even the BCC said this week there was a reluctance among businesses to invest during the recession.”

It has been reported this year that SMEs are often fearful of approaching banks when they have cashflow problems, in case their credit is withdrawn or they are only offered credit but on more expensive terms.

But Mr Ibbetson insists those with viable businesses need not have cause for worry.
He added: “The problem is sometimes that firms will often only come to us at the 11th hour, rather than tackling problems earlier. Our lending terms have not changed, but we are asking more questions now.

“At some point, that money has to be paid back and we need to ensure any business is in a position to do that. It would be irresponsible if we didn’t ask those questions.
“But, once an overdraft has been agreed, we will not pull it and once the pricing has been agreed we will not change that either.

“We accept that, after what has happened over the past year, rebuilding trust in the banks is going to take time.

“We are  approving 85% of the loan applications we are receiving from businesses. There is no shortage of liquidity available for the SME sector. But, before we lend, we have to be sure a business is viable.”