A MUCH tougher approach is needed to get banks lending to smaller firms, Business Secretary Lord Mandelson said today.
Business bosses should be able to go "over the heads" of bank managers, according to the Labour peer, who said a recent easing of lending policies was not satisfactory.
Lord Mandelson will be a keynote speaker at the Federation of Small Businesses annual conference in Aberdeen today, along with shadow chancellor George Osborne.
He told BBC Radio Scotland today: "Banks have eased the constraints they’ve been operating in their lending to small businesses, but I’m not satisfied with that - I think they have to go further.
"I know it’s difficult for the banks because on the one hand they’re being told to repair their balance sheets, and next they’re being asked to increase their lending.
"They would see this lending as being more risky during a recession.
"Well, we’re now into recovery and what I’m concerned about - and I’ve discussed this with the banks - is that as the demand for lending picks up, as the recovery strengthens, they at the same time must respond to that and increase their supply of lending."
The lending constraints have caused anger because much of the banking sector was rescued by multibillion-pound Government bail-outs during the financial crisis two years ago. The state owns 84% of Royal Bank of Scotland and 43.5% of Lloyds.
Lord Mandelson said he was aware of many cases where small businesses feel they are being "unfairly treated".
He added: "What I want to do is raise that with the banks and find a better means of doing so to enable small businesses, in a sense, to appeal over the heads of their local managers and area directors, go to a central point in the banks and say ’Look I’ve been a long-standing customer of yours and I don’t expected to be treated in this way’.
"We’ve got to be, I think, much tougher on that."