UK banks warned against profiteering from virus crisis

British companies, including major banks, have been warned against profiteering from the coronavirus crisis and told to pass on the benefits of historic stimulus measures to their customers. The Labour MP Chris Bryant has accused UK banks of taking advantage of the surge in demand for emergency loans, despite interest rate cuts and major government-backed borrowing schemes for struggling businesses.

"The base rate at the Bank of England is now 0.1% but … banks like Barclays are charging anything between 7% and 12%," he said. Bryant said lenders should be offering loans with interest rates closer to 1% to 4%, depending on risk, and urged banks to take into account how many of their new loans would end up being government-backed if borrowers failed to pay.

"They're taking minimal risks and charging exorbitant rates. It looks like profiteering to me," Bryant said.

Last week, the chancellor, Rishi Sunak, announced state-backed loans of at least £330bn for UK companies including through an extended coronavirus business interruption loan scheme that offers interest-free loans of up to £5m for 12 months.

In a joint letter (pdf), Sunak, the Bank of England governor, Andrew Bailey, and the interim head of the Financial Conduct Authority, Christopher Woolard, told UK banking chiefs to take "all action necessary" to make sure those measures were benefiting households and businesses as planned. "The priority for all of us - banks, building societies, government and the financial authorities - should now be to take all action necessary to ensure that the benefits of the measures … are passed through to businesses and consumers," the letter said.

"This will require a willingness to maintain and extend lending despite the uncertain economic conditions. We must ensure that firms whose business models were viable before this crisis remain viable once it is over." But Stephen Jones, the head of the banking lobby group UK Finance, said that businesses that did not qualify for the government scheme would be offered loans at normal rates.

He said that run-of-the-mill business loans were not tied to the Bank's base rate and instead "depend on a number of factors including the lender's funding costs, credit risk charges dependent on loss probability plus operating costs incurred by lenders through the life of the loan". Barclays said: "Our interest rates are in line with industry standards."

Meanwhile, the Competition and Markets Authority confirmed that it was extending measures that temporarily loosened competition rules for food retailers to all UK companies. It means the competition watchdog will not crack down on rival companies that try to cooperate in the public interest, including to avoid product shortages during the Covid-19 outbreak.

However, the CMA warned it would crack down on any business that tried to take advantage of consumers during the outbreak. "The CMA will not tolerate conduct which opportunistically seeks to exploit the crisis," it said.

Asian markets were mixed Thursday after a rare two-day rally, while investors were also looking anxiously at Washington, where a gargantuan stimulus package for the world's top economy was being held up by lawmakers wrangling over details. The unprecedented $2 trillion plan -- described by Senate Majority Leader Mitch McConnell as a "wartime level of investment" -- helped spur a surge across global equities as panicked traders worried about the impact of the coronavirus sweeping the planet.

But another advance on Wall Street was blunted as it emerged that four Republican senators have baulked at the generous provisions agreed to in the bipartisan deal with the White House. The bill had been due to pass the chamber before heading to the House of Representatives and then President Donald Trump's desk.

Still, Treasury Secretary Steven Mnuchin said he was confident the agreement would eventually be waved through. The plan, together with a huge bond-buying programme by the Federal Reserve that effectively prints cash, is part of an unprecedented global response to the outbreak, which has even seen Germany put together a list of measures worth more than $1 trillion.