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he closure of the LSB – which
T oversees the Standards of Lending Practice for business customers, the only independently monitored and FCA-recognised lending protections for many SMEs – reopens a clear and significant gap in the UK’ s regulatory framework, leaving SMEs more exposed to risks at a time of mounting economic pressure.
The LSB’ s decision to close follows the withdrawal from registration by the UK’ s largest high street banks, which said that the FCA’ s Consumer Duty provided sufficient protection across all customer types, including SMEs. However, the Consumer Duty was neither designed nor intended to cover SME lending, much of which lies outside the FCA’ s regulatory perimeter. It provides no tailored protections for SMEs or independent oversight of a firm’ s conduct in this area.
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The LSB’ s business Standards were the only independent framework specifically designed to protect SME borrowers and hold their lenders to account. While SMEfocused lenders continued to adopt these Standards in 2024 and 2025, the withdrawal of the largest high street banks ultimately left the LSB with no alternative but to winddown its operations.
Emma Lovell, Chief Executive of the LSB, said:“ The loss of the LSB leaves a clear gap where statutory regulation doesn’ t reach. That’ s a loss for SME customers and it’ s not in the longterm interests of the financial services sector. Without the LSB’ s business Standards – the only independently overseen protections of their kind – many SMEs now face greater risk and are left without bespoke protections or independent oversight.”
Ken Scott, Chair of the LSB’ s Board, added:“ The withdrawal of the large high street banks has had three critical consequences. It has removed independent oversight for thousands of SME customers, increasing the risk of harm in
IN 2025, THE LSB’ S WORK ON ETHNIC MINORITY- LED BUSINESSES – WITH STRONG SUPPORT FROM BUSINESS GROUPS AND POLICY MAKERS – EXPOSED SYSTEMIC BARRIERS TO ACCESSING FINANCIAL SERVICES.
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