HMT consults and calls for views on enhancing the Bank Referral Scheme

HM Treasury has published a consultation paper and call for evidence inviting views on a range of proposals aimed at enhancing the UK's Bank Referral Scheme (BRS) to improve its performance. The BRS requires lenders (designated banks) to refer small-and medium-sized enterprise (SME) customers that they reject for finance, with the SME's permission, to finance platforms that can match the SME with alternative finance providers, to improve access to finance. The BRS operates under the Small and Medium Sized Business (Finance Platforms) Regulations 2015, which were made under powers in the Small Business, Enterprise and Employment Act 2015.

Key proposals include:

• Expanding the scope to allow non-bank lenders (e.g. building societies) to be designated under the BRS.
• Introducing a voluntary opt-in mechanism for smaller lenders to participate in the BRS.
• Improving transparency and timing of information provided to SMEs during the application process, including minimum standards for how and when they are informed about the BRS.
• Broadening referral triggers, for example, where no decision is made on a finance application within a specified timeframe.
• Requiring banks to provide reasons for rejection and mandating finance platforms to signpost SMEs to business support if funding is not secured.
• Simplifying consent procedures, potentially allowing SMEs to give comprehensive consent at the outset of their application and enhancing data sharing between banks and platforms.
• Introducing a statutory power to require designated banks to submit performance data.
• Exploring the role of open finance and how it could complement or evolve the scheme in future.

The deadline for responses to all the specific questions outlined in Annex A is 22 December. Based on the feedback received through this consultation and call for evidence, the UK Government will assess whether amendments to the existing BRS legislative framework are necessary, or whether its objectives can be achieved through alternative means, such as more designations or issuing guidance.

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