Cambridge University college, Trinity Hall, has joined together with the Cambridge council-controlled pension fund to start up a bank that will target SME’s. This is in response to small businesses complaining about the difficulties in getting funding. The bank is called the Cambridge and Counties Bank and hopes to lend over £100 million to SME’s over the next four years.
The bank is jointly owned by Trinity College and the Cambridge Local Government Pension Fund which manages assets of over £1.5 million. The college are looking at the bank as a way to strengthen their endowment returns. Chief executive of the new bank, Gary Wilkinson, said that they will be doing business with SME’s that have been refused credit by larger banks, but that they will not take on any risky loans.
Pressure is being put on the five largest banks in the UK to increase their lending to SME’s but so far the message doesn’t seem to be getting through. Last year LTSB, RBS, HSBC and Santander UK, missed the target set by the government’s Project Merlin for lending to SME’s. They lent only £74.9 billion instead of the target £76 billion.
The Trade Minister, Stephen Green said that inadequate finance for SME’s was a threat to British exports while the Federation of Small Businesses said that Project Merlin had failed this important sector of the economy. The banks have denied that they are reluctant to lend to SME’s. Chief executive of HSBC, Stuart Gulliver, said that there was a lack of demand for credit from SME’s.
Mr. Wilkinson says that the Cambridge and Counties Bank will focus on personal relationships with customers. They will make loans for a duration of three to twenty years and say that a preliminary response to loan applications will be given within 48 hours. They will be opening retail accounts within the next year.