Page last updated at 04:37 GMT, Sunday, 23 November 2008

RBS lending pledge to small firms

Royal Bank of Scotland branch
The bank has been hit hard by the global financial crisis

The Royal Bank of Scotland, Britain's second biggest bank, is to guarantee overdraft rates and contracts for its business customers for at least a year.

It is the first bank to promise not to withdraw its lending facilities in an effort to help its 1.1 million business customers survive the downturn.

The move has been welcomed by politicians and small businesses.

But there are fears the pledge may have come too late for many firms already suffering from rising borrowing costs.

'Businesses aggrieved'

RBS, which also owns NatWest, has been hit hard by the global financial crisis.

Earlier this week, its shareholders voted to accept a 20bn government bail-out of taxpayers' money.

The vote means the government could end up taking a stake of up to 60% in the troubled bank.

The BBC's business correspondent Joe Lynam said the fact that a bank was making a public pledge to honour agreed overdraft facilities was a measure of how badly the credit crunch had impacted on normal lending practices.


The banks are like battle tankers - they are very slow to move but once one of them moves, it's good news

Stephen Alambritis, Federation of Small Businesses


Stephen Alambritis, of the Federation of Small Businesses (FSB), said other banks should follow suit.

"Now is the time for them to wake up to the fact that they have been rescued, so that in turn they can rescue small businesses," he said.

"Small businesses are aggrieved at the way they have been unfairly treated by the banks and they expect the government, which now has a stake in the banks, to resurrect that balance."

He said he was confident other banks would follow RBS's lead.

"They have a great tradition of copycat tactics. The banks are like battle tankers - they are very slow to move but once one of them moves, it's good news," he added.



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