By Daniel Hunter

Research carried out by RSM Tenon has revealed that 65% of small to medium sized enterprises (SMEs) believe The Parliamentary Commission on Banking Standard’s proposed ring-fencing of banking activities (separating investment banking from retail banking activities), will make banking safer.

The Commission has called for further measures to enforce the ring-fence and ensure ring-fenced entities are structured as empowered sister companies not subsidiaries.

The RSM Tenon Business Barometer - a quarterly survey carried out by You Gov of senior management in small and medium sized enterprises — said only 21% of SMEs believe ring-fencing will not make banking safer.

However, despite a majority believing banking will be safer after the proposed ring-fencing, 36% of SMEs think it will actually be harder for SMEs to borrow money, with only 21% believing it will be easier to obtain funding after ring-fencing.

In addition, Government recently announced plans to introduce a state-supported bank that would loan money to SMEs who cannot get financing elsewhere. Almost 60% of SMEs thought this was a good idea, with only 18% saying it was not.

“People believe, I think rightly, that while this change would make retail banking safer, it will make no difference to their ability to borrow," Tom Maclennan, Head of Lender Services at RSM Tenon said.

"The reality is that the scale of lending up to 2008 that is now viewed as inappropriate and still in the course of being addressed, is so great that the willingness and ability of banks to lend and of customers to borrow, is constrained accordingly and only time and a return of confidence will change lending/borrowing behaviour and actions.”

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