Chamber of commerce calls for inquiry into banks’ treatment of SMEs

The Australian Chamber of Commerce Industry has called for a Productivity Commission inquiry into the way banks provide finance to the SME sector, arguing small businesses are taking an “unfair hit” from credit rationing.

ACCI chief executive says a full meeting of the 36 employer groups that make up the chamber of commerce want the Commission to look at four specific issues, including the potential impact of fewer participants in lending markets, the implications of higher risk premiums being placed on SMEs, international comparisons and the changes that have occurred in the cost and availability to finance to SMEs over time.

The latter point – the sharp rise in SME loans costs as compared to those for other borrowers, particularly mortgagees – is a particularly beef with the ACCI’s members.

“Shedding light on the reasons why the gap between mortgage rates and small business rates has grown will be an important step towards a fairer deal for small business customers,” Anderson said yesterday in a statement.

He cites Reserve Bank data that shows that while the cash rate was reduced by 425 basis points between August 2008 and May 2009, small business loans had fallen by only around 230 basis points.

As official interest rates have started to rise in the last few months, the banks have been quick to pass on the full increase to SME customers.

Anecdotal evidence also suggests banks have been pressuring SMEs to shift their deposit business or risk having their access to credit cut further.

Federal Opposition small business spokesperson Steven Ciobo has backed the calls from ACCI and, not surprisingly, used the inquiry calls as a chance to slam the Rudd Government.

“Small businesses have been the whipping boy of the banks during the downturn, and the Rudd Government has simply stood by and watched it happen.”

“The margin between residential-secured loans for small business and regular mortgages has ballooned from 0.30 percentage points when Labor was elected to 1.30 percentage points today.”

The office of Federal Small Business Minister Craig Emerson was not available for comment prior to publication.

The ACCI’s inquiry call comes just a few days after new figures from Roy Morgan Research revealed satisfaction about banks among SMEs has actually remained reasonably steady over the last 12 months, despite the tough conditions imposed on small business by lenders.

Roy Morgan’s survey showed SME bank satisfaction had fallen from 68.5% in the year to September 2008 and 67.9% in the year to September 2009.

Westpac’s average satisfaction rating improved 2.8%, while Commonwealth Bank jumped 4.8%. NAB lost 5.8% and ANZ slipped 1.9%.