HSBC announces £1bn fund for UK businesses

HSBC has announced the establishment of a $5 billion (£3.4 billion) global fund to lend money to small and medium-sized businesses affected by the credit crunch.

The banking industry has come under fire for not passing on the full benefit of interest rate cuts to consumers, for charging higher interest rates on loans to businesses and for reducing the savings rates on instant access accounts.

But in a move aimed at stemming such criticism, a total of £1 billion has been kept to assist businesses in the UK.

A spokesperson for the banking giant, which has 9,500 offices around the world, said: "The fund has been designed to help customers with fundamentally sound businesses weather short-term shocks caused by the downturn, by supplying working capital to help businesses with their cash flow needs and support businesses that trade or aspire to trade internationally.

"The fund represents new money and will be funded from HSBC's own resources, allocated on a case-by-case basis using the bank's normal lending criteria."

The bank claims that it has lent more this year than last in spite of the higher costs of lending between banks and also states that 32,000 businesses had moved their business bank accounts to it since the beginning of the year.

Business secretary Peter Mandelson welcomed the move and urged other banks to maintain charges and rates available to small and medium enterprises.

HSBC's move follows the Royal Bank of Scotland's pledge to not begin proceedings to reclaim a person's home until at least six months after a customer falls behind on mortgage payments.

Chancellor Alistair Darling has urged banks to institute a three-month wait before beginning repossession proceedings on lenders who have failed to pay an installment on their mortgage.

Pressure has been increasing on banks to help extend finance to ailing businesses after the government's £37 billion bailout plan saw it take stakes in the Royal Bank of Scotland, HBOS and Lloyds TSB.

Other high street banks were provided with emergency funding and liquidity support as part of the other measures in the bailout.