Royal Bank of Scotland (RBS) is establishing a small business charter as it attempts to fend off accusations that it’s not doing enough to lend to small and medium-sized businesses.
The 84% state-owned bank, and its subsidiary NatWest, will become the first bank to cap arrangement fees for loans and overdrafts, at 1.5% for at least a year.
It will limit fees charged to companies with revenues of less than £25m for at least 12 months. While other banks already offer fees as low as 1.5%, they reserve the right to change rates on a quarterly basis.
The bank has come under increasing pressure from the Treasury to increase lending to small businesses in return for more than £50bn in state aid it has received. It is still reportedly behind on its promise to increase business lending by £16bn this year and next.
As part of its small business charter, the bank is also offering two years' free banking to all start-up firms, promising to guarantee overdrafts and pledging that it will provide more "transparent" banking services.
Peter Ibbetson, small business chairman at RBS, said the charter is “not a government-driven initiative”.
“We are trying to respond to what businesses are telling us,” he said.
The bank is reserving the right to charge higher fees for firms in financial difficulties.
© Crimson Business Ltd. 2009