Loan Guarantee Scheme

HC Deb 09 April 1984 vol 58 c21W

Mr. Grylls

asked the Secretary of State for Trade and Industry what was the cost of the Robson Rhodes report on the loan guarantee scheme.

Mr. Trippier

The cost of the Robson Rhodes study was £118,450.00, half of which is to be met by the London and Scottish clearing banks.

Mr. Grylls

asked the Secretary of State for Trade and Industry what agreements about default procedures were made with the participating banks prior to the introduction of the loan guarantee scheme in 1981.

Mr. Trippier

Under the Department's agreements with participating banks, where a scheme borrower is unable to meet the loan repayments, or otherwise cannot meet the terms of the loan, the banks will usually make demand on the borrower for repayment of the outstanding amount. The banks then make demand on the Department under the guarantee arrangements. Claims are processed quickly by the Department. Where business assets are available, that are covered by security taken by the banks in respect of the scheme loan, the banks are responsible for effecting any recoveries.

The proceeds of such recoveries are shared between the banks and the Department on the basis of an agreed formula. The decision on whether to pursue reasonable assets in specific cases depends largely on the banks' assessment of the amounts that are likely to be recovered. This aspect of the scheme was referred to in the recent report by Robson Rhodes published on 4 April and available in the Library of the House.