We embarked on the development of the Standards following Professor Russel Griggs’ independent review of the Lending Code in 2015, which recommended two separate codes of practice, one covering lending to personal borrowers and a separate one covering lending to small businesses, including an extension of the scope from the Lending Code’s micro-enterprise limit of €2m to £6.5m.
Following the launch of the personal Standards last July, today sees the launch of the Standards of Lending Practice for business customers. Forward-looking, the new Standards set a clear message for firms on transparency and fair treatment of their customers; they do not attempt to go over old ground but they do reflect learning from previous experiences with lending to SMEs.
I see this new code of practice as a significant step in helping small businesses to rebuild customer trust and confidence in the industry and I believe it offers a realistic chance to show that the industry can self-regulate through voluntary standards. In particular, we have been careful in drafting them to allow flexibility, with a focus on outcomes, and we have worked with practitioners to ensure that they will work in practice. We needed to achieve a balance between setting high standards and affording meaningful protection to borrowers, while avoiding unintended consequences of over-regulation; we want the market to work well and not stifle innovation or restrict lending.
Through our enhanced oversight strategy, we will continue to work closely with our registered firms to support the implementation of this new voluntary regulation, and if things go wrong, firms will be held to account.
A great deal has been achieved in that past 18 months in respect of raising the protections for business customers and we are delighted to have been the key drivers behind such an important piece of regulation. However, our hard work doesn’t stop here; there’s much more to be done and further work is underway in this area. Overall, we believe that the Standards will play a major part in improving fair customer outcomes.
For more detail on the Standards visit the LSB website