The Federation of Small Businesses (FSB) has raised concerns over the City watchdog’s examination of lenders’ use of personal guarantees, warning that it could undermine confidence in the financial system. In a letter seen by Sky News, FSB national chair Martin McTague criticized the Financial Conduct Authority (FCA) for its narrow focus on the issue.
The FSB filed a ‘super-complaint’ about lenders’ demands for personal guarantees, expressing worries that small business owners were being discouraged from seeking bank loans. This, they argued, could hinder the growth of businesses and impact the wider UK economy by reducing the demand for credit.
McTague highlighted the importance of personal guarantees in business lending but cautioned against excessive use, which could deter investment and undermine productivity. The FCA, in response to the complaint, stated that its regulatory scope limited its ability to investigate and act on the issue.
Craig Beaumont, chief of external affairs at the FSB, expressed disappointment in the FCA’s handling of the matter, likening it to past banking scandals where regulators acknowledged problems but failed to address them effectively. He emphasized the need for better regulation in the lending market to protect small businesses.
The FSB is now exploring other options following the FCA’s response, as they believe small businesses deserve better treatment and regulatory oversight. The controversy surrounding personal guarantees and their impact on small businesses continues to be a point of contention between industry representatives and regulatory authorities.