LONDON (Reuters) – The Bank of England said on Thursday it will lay the groundwork for a new platform that will help small companies get loans to grow.
FILE PHOTO: A man walks past the Bank of England in the City of London, Britain, February 7, 2019. REUTERS/Hannah McKay//File Photo
BoE Governor Mark Carney said it would consult on developing an open platform for competitive financing to plug a 22 billion pound ($27.93 billion) funding gap for small and medium sized enterprises (SMEs).
“It is not for the Bank of England to build this platform but we can help lay some of the groundwork,” Carney said in a speech in London’s Mansion House.
Lenders would be able to access credit data held on companies on the platform to speed up lending.
Part of the problem is that the assets that SMEs are seeking to borrow against are increasingly intangible – like a brand or user base – rather than physical machinery or buildings, Carney said.
This makes decisions on a loan by a bank trickier.
“This should not be the case in a data-rich world. Lenders should be able to access a broader set of information on which to base credit decisions,” Carney said.
SMEs could create a “portable credit file” drawing on sale, trading and other data from their business which could then be shared with a wide range of competing lenders through a national SME financing platform.
The identification of businesses and verification of their data will be crucial to making this work, the BoE said.
A “legal entity identifier” (LEI) system was introduced after the financial crisis for regulators to identify each financial firm.
The BoE said the LEI system could be adapted for SMEs in Britain so they can pull their data into a single credit file for the new platform to shop around for finance.
“Putting data to work is critical to closing one of the biggest funding gaps in the country,” Carney said.
Reporting by Huw Jones and David Milliken, editing by Hugh Lawson