The Impact on Sme's

Assessment Two

ABSTRACT:

In the following essay various aspects of Banks and their operations are looked at and analysed to investigate how they have changed the way they operate due to the current economic climate. Scenarios have been looked at, which lay out what could happen to Barclays if implementations and were introduced to increase risk-based capital and if their balance sheet liquidity was also increased. Findings conclude that the financial crisis has taken a toll on all aspects of a bank’s financial operations.

A) Critically Evaluate the SME lending policies of British Banks before and after the financial crisis.

Small and medium enterprises are said to be the “engine” of the European economy, not only is this true for Europe but also true for the UK as a whole. They create jobs and are crucial for creating competitiveness and employment within the UK, without which the economy would grow stale and obsolete as there will be no new opportunities to expand local economies and at a later date, with the growing of these enterprises the possibility of bettering the economy as a whole (Gunter Verheugen, 2003). To be able to do this however, they need to be able to access finance without needless impediments and difficulty from banks in order to finance the expansion of the business. Small businesses and enterprises account for the majority of the job creation in the UK amounting to 76% of all new jobs created compared to 24% created by large businesses (BIS (2011) “Job Creation and Destruction in the UK: 1998-2010”).

This part of the essay will look at how banks lending policies have changed since before the financial crisis and how they have been changed now that crisis has been in place for over 5 years.

Data shows that there has in fact been a decrease in bank lending to SME’s, however, there is mixed debate as to the reason for this, with some writers blaming banks for having changed their lending policies which has...