Banks Editor's Choice Europe Fintech

Big banks have come under fire for their ‘disappointingly slow pace of lending’ and slammed for not being agile enough

Kate Dickins has more than 25 years of experience in the financial sector at FTSE 100 businesses but has never put in a tougher shift than since the government announced a wide-ranging package of financial measures to try to cushion the effect of Covid-19 on people and businesses.

As managing director of government schemes and external partnerships at NatWest, Dickins reveals she worked 59 consecutive days to deliver the three business interruption schemes introduced by the government.

Dickins, alongside Ciaran Crilly, director of government schemes at NatWest, took time out of that hectic schedule to speak to The Fintech Times about the way these schemes have been developed and also to address some of the negative headlines aimed at the top banks.

“I think it’s very easy to sit on the outside and say banks are not reacting fast enough, but some of the government schemes that we have are complex objects and that’s the bit that people need to understand. When you’re doing a complete sea change to effectively get a completely different object going, it’s something that is not going to happen within 24 hours,” says Dickins.

“We’ve got three schemes going on and other schemes in the background that we need to be managing the interplay of well. Plus, we have government stakeholders, industry stakeholders and industry bodies that want to know what we think, so the flow is ferocious.”

“Everybody was put in a difficult position because what we’re dealing with is effectively a low traffic thing, becoming a really high traffic thing really, really quickly. It does weigh quite heavily that we are not going to be able to save every single business, as it’s always on our minds to see if we can make sure that we have done everything we can do to help the widest number of people possible.”

The CIBLS scheme is an evolution of the Enterprise Finance Guarantee Scheme (EFG), which guarantees loans to fund the future growth or expansion of a business, from £1,000 to £1.2 million, and there has been criticism that its ‘cumbersome’ and ‘strict’ structure has slowed down the lending process.

However, Crilly says there have been benefits to evolving an existing scheme.

Crilly says: “EFG was formed at the time of the financial crisis in January 2009, but it effectively predates that back to the initial launch of Small Firm Loan Guarantee (SFLG) in 1981 and the current portal and bank delegation document effective from 2004 and 2005.”

“EFG was and remains a fairly vanilla SME credit guarantee scheme and to a greater, lesser extent, it does what it needs to do. It provides a guarantee for part of any loss in a recovery scenario. But when we look at EFG; it has actually been more successful than many of the other initiatives that were introduced in response to the credit crisis.

“Some of the other schemes were much more niche, more bespoke and incredibly short lived. Some had very, very low volumes. So, the fact that the EFG has existed for 11 to 12 years is a testimony to the fact that it kind of does what it needs to do.

“But EFG was always much lower volume than similar SME credit guarantee schemes in many parts of Europe and the wider globe, just in terms of penetration and the proportion of SMEs accessing this type of funding.”

“Origination figures under EFG were quite reasonably high in 2009 and 2010, but much lower in more recent times and typically trending in the region of £200million to £250million a year across the industry over the past four to five years.

“It’s interesting to note that with the main CBILS scheme, there has been public attention on it at least in the initial weeks of a lack of take-up or drawn lending due to delays in certain banks but when UK Finance initially published some data maybe three to four weeks into the scheme, already a greater value of loans are drawn under CBILS then drawn under EFG in the past five years so that’s the kind of testimony to the sea change that’s happened that has effectively brought the EFG infrastructure into the Covid-19 impact and into 2020.”

“The interesting thing with the response in late 2008 and early 2009, we had a series of different schemes, some very niche and non-specialist, for example, one for the automotive sector. The response this time around, initially CBILS, then CLBILS and then the BBL, is that each of those schemes is different and is for a different customer base, but fundamentally it’s for the same purpose and there’s a there’s a uniformity there which is beneficial just from a scalability perspective.”

According to Dickins, because NatWest has the only ‘schemes team’ in the UK it knows the schemes ‘better than anybody’ and is more than willing to share this knowledge with everyone.

Dickins says: “We’re working with the British Business Bank (BBB) on its application programming interface (API), and we’re not doing it with RBS [Natwest] in mind, we’re doing it with the whole industry in mind. We are the only schemes team in the industry, we have a long history with schemes and know them very well and know where there’s likely to be pressure points. And, it’s easy to help people to understand directionality if you know schemes that well.”

“It’s really important to understand that there are manual processes that you need to think about and because we know the process well we were able to articulate to the British Business Bank that some things would be a block if you’re going to a mass produced scheme because the rails upon which it sits were never designed for the mass market.”

“What we tried to do was flag these things in advance. Now, any other bank could have done that, but they don’t have the scheme teams like we do and they didn’t necessarily have that granular understanding. We could have just kept quiet about that and go ‘Well we’re just going to launch and go great guns’, but that was never a decision to be made.”

“We were always going to say, ‘here’s what we think we might want to do with this process which means it would be to the benefit of everybody’. And that’s how we managed to have a dialogue that now put us in a situation where that mid process is removed and actually the API then becomes very important because then that was how we interfaced at much higher scale and therefore can serve the British public at a much greater frequency than we would have done if we hadn’t had the opportunity. And, that’s not just for us, that’s for every bank.”

“What we’re trying to do is help to craft, inform and steer with the entire industry in mind, because that’s the right thing to do. We know that there are customers at other banks that will have benefited from some of the discussions that we’ve had with the BBB and with Her Majesty’s Treasury and some of the things that we’re doing right now are industry based. The BBB have been magnificent and very willing to work with people to get it right.”

According to Dickins, this offer of working with others in the industry extends to fintechs, despite receiving criticism from some quarters.

“I think where the fintechs may have frustration is because they’re sitting there saying ‘Come on, we can do this’ and we get that. I am aware that there has been a couple of fintechs that have said let’s talk about your eligibility fails but people don’t often understand the other side of the fence.”

“Where the fintechs probably needs some help, and I mean this in the best way possible, is about understanding the objects you are interfacing with. What some don’t understand, and this is where we need to help everybody to get the right level of understanding, is that if you have an eligibility fail on a scheme, it’s still a fail. It doesn’t matter which bank you go to it’s still not going to eligible for the scheme.”

“But this lack of understanding is easy to fix, let’s demystify it and let’s get everybody together and let’s see what impressive things everybody can do. Then let’s take those impressive things and see how we can apply them in the schemes, because that to me, would be a great conversation. We’re very willing to participate in that and I’m quite sure that the British Business Bank is as well.”

“We want a market that’s clear, fair and transparent and we are very respectful of the digital platforms. We think they have done a great job and we have relationships with them. There is no them and us mentality and I would invite everybody to come and talk about how we might be able to help with the government schemes to help the economy survive and thrive in the future. And that conversation will not take place with the top seven banks. It will be everybody.”

“If everyone in industry puts its collective minds together and says, actually, how can we bring out things that will be useful to people? How can we leverage digital journeys? Those are the sort of conversations I’d really like to see happen.

Crilly adds: “There are other initiatives where I assume fintechs will be very prominent, such as the coronavirus future fund, which was announced last month. Some of the British Business Bank’s patient capital initiatives are moving the dial with fintechs heavily, heavily involved in that also.”

“But in addition, the suite of CBILS, CLBILS and BBL is going to require fintech input in the sense that until two months ago, very few businesses of any size in this country had a government scheme with any of any form. Within two to three months, a very large proportion of businesses will have government schemes.”

“That funding will at some stage need refinanced and some of that may transfer to fintechs and more generally, a government scheme that until recently would have been viewed as infrequently used and quite mysterious isn’t going to be so fintechs are very much a part of that solution.”

A final area that we addressed with NatWest was the criticism that some lenders since the financial measures were introduced have sought personal guarantees in order to access CBILs, which means they could go after a business owner’s personal assets, such as savings and second homes, if the loan goes awry. NatWest insists it is the only bank to say it would not require personal guarantees (PGs) in support of any CBILS loans from when the scheme was launched.

Dickins says: “Personal guarantees are at the lender’s discretion in the underlying scheme. We were the first bank to say no to PGs and the reason we did that is because we knew how emotive a point this is going to be.”

“We’re in a time of what is effectively economic shock and we have somebody who’s facing losing their business and their livelihoods and we shouldn’t be penalising business customers if the business fails. We knew that it was the wrong thing to do, as you cannot have somebody who’s at extreme risk already due to economic shock have them in that situation where they then spend their whole time worried about what happens if something goes wrong.

“We need to help them to be focused on the right things, which is turning that business around and not worrying about the unforeseen consequences of signing up to a government loan.”

“This is not business as normal. We a purpose led bank and we are in the market to do the right thing and service our clients wherever we possibly can. And that requires a lot of thought and quickly, when you’re responding to situations like this, you shouldn’t ever be too far away from your guiding principles.”

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