Banks need to serve small business better, says NAB

Joseph Healy, head of business banking at National Australia Bank, suggested at a conference yesterday that the industry take seriously the perennial claim of small business that the sector will not readily lend to them.

Speaking at the Australian Securities and Investments Commission Summer School in Sydney, Healy said that "I don't believe the system - and by that I mean the regulatory system, the legal system, the financial system - is best placed to support the growth of small business.

"My sense is today that the banks tend to be more defensive and argue 'we are lending money, what is your problem' and produce a whole bunch of statistics.

"I'm going to be somewhat provocative and say that I don't believe the banking system here has best served the interest of small business."

Healy said banks tended to organise their capacity to lend around the needs of big business.

"The special needs of small to medium enterprises have been left behind as the banks and the financial system have focused on areas that arguably present a higher profitability."

Healy pointed out that banking regulations on the allocation of capital were one force behind the declining percentage of lending to business.

"You have a perverse distortion of the economy that it is more profitable for a bank to allocate capital to a weekend holiday home than it is to support a small business."

The Australian and the Financial Review reported on Healy's speech to the ASIC conference.