Banks to help businesses hit by Carillion collapse

LONDON: Several of Britain's biggest banks signalled their intention to support small companies that supplied Carillion and could be hit by the collapse of the construction group. A day after Greg Clark, the business secretary, met UK banking executives to discuss their support for small businesses hurt by Carillion's collapse, three of the country's big lenders announced they were setting up specific funds for this purpose. HSBC, Royal Bank of Scotland and Lloyds Banking Group said they were setting up funds worth a combined £225m to help any small business clients affected by the liquidation of Carillion by extending overdrafts, offering repayment holidays and waiving fees.

However, one rival banker dismissed the funds as "pure marketing", pointing out that banks do not usually need to set up funds in order to finance companies. Another senior banker pointed out that the announcement of RBS's new £75m fund jarred with the scathing criticism of the state-controlled lender in a parliamentary debate on Thursday about the harsh treatment of small businesses by its Global Restructuring Group unit after the 2008 financial crisis.

Last weekend, Carillion's board decided to opt for liquidation after the government refused to bail it out and three of its five main UK lenders refused to provide it with £20m of extra funding. The three that opposed the move were RBS, Lloyds and Santander UK. The two in favour were HSBC and Barclays. Barclays said it had decided against setting up a fund for customers hit by Carillion's collapse, pointing out that it had set up a helpline and saying: "Where clients are impacted we will look at increasing overdrafts, interest-only loan repayments and immediate help with cash flow on a caseby-case basis."