LSB drafts new standards for ‘UK backbone’ SME sector

LSB drafts new standards for ‘UK backbone’ SME sector

Operating standards for UK banking SMEs have been stepped up by the Lending Standards Board (LSB), a self-regulatory organisation for the UK banking industry. 

This week, the LSB announced the findings of an industry-wide consultation into UK banking standards, as well as drawing upon its own research into compliance, concluding that digital journeys and how SMEs apply for or access financial products online will be enhanced.

Developing guidance for companies to implement standards across digital channels is a key LSB objective this year, in line with the increasing digitisation of financial services and payments.

The LSB explained that this is so customers can receive ‘appropriate support regardless of how they access financial services’. Regarding the banking sector, the LSB may have adopted this policy after observing a rollback in UK retail banking of late.

Britain’s high streets have seen numerous banks closing their doors or at least reviewing their hours. Lloyds and Barclays are two of the biggest names shutting down local branches, whilst Sainsbury’s also announced the withdrawal of its banking services earlier this year.

These banks have noted a general decline in use of retail banking, and an increase in online banking. The LSB likely factored this into consideration when drafting its new standards around digital channels for SMEs.

Laura Mahoney, the LSB’s Head of Policy and Legal, said: “SMEs are the backbone of the UK economy so it’s vital that they have the same access to fair outcomes when using financial products that consumers enjoy. 

“The LSB’s pioneering business standards play a key role in ensuring this happens and protecting SMEs from harm. The financial services industry is dynamic and constantly evolving, so keeping our standards under review is critical to ensuring they continue to uphold our commitment to fairness and excellence in customer outcomes for businesses. 

“This consultation evaluated emerging areas in business lending, such as the use of digital channels to deliver lending products and green finance, to ensure the standards reflect, and are responsive to the changing economic and business environment. 

“We’re also building on our groundbreaking work on financial inclusion, to make sure businesses get the support they need regardless of their owners’ backgrounds or specific needs.”

The consultation has also explored other areas, namely how standards and guidance can support sustainable products and services as the regulatory approach to green finance continues to evolve.

With world temperatures reaching record levels in 2023 and 2024, green policies have taken on heightened importance in the minds of many companies and, at least in theory, in the eyes of governments.

On a more customer-centric level, the LSB hopes to enhance guidance on personal guidelines after identifying instances where reviewing guarantees could be working ‘more effectively’, whilst further guidance on declined lending applications is also planned.

An additional area of interest is inclusion by ensuring “a broad range of SMEs’ circumstances and needs throughout the product design and approval stages” and creating “products and services that work well for all”.

Lastly, the LSB has also examined how its business standards could be applied to a ‘wider range of products and sectors’, suggesting the guidance could be useful for other actors in the UK’s vast financial services industry.

Mahoney remarked: “Our review, as well as our work over the past 12 months, has identified a number of barriers that businesses face when accessing finance – whether it’s their ability to access sustainable finance, or the challenges that ethnic minority-owned businesses can encounter when looking for new lending. 

“We look forward to engaging with lenders and the business community on lowering these barriers and ensuring the business standards are fit for the future – and can continue to support SMEs as they support the economy.”