By Martin Arrowsmith and Martin Griffiths of the Bank’s Prudential Regulation Authority, Jeremy Franklin, Evan Wohlmann and Garry Young of the Bank’s Monetary Analysis Directorate and David Gregory of the Bank’s Financial Stability Directorate.
This article presents the results of an investigation into the extent of loan forbearance in the SME sector and its implications for productivity and financial system resilience. Around 6% of SME borrowers were estimated to be in receipt of some form of loan forbearance in March 2013. This accounted for around 14% of the major five UK banks’ exposure to this sector. SME forbearance appears to account for only a small proportion of the weakness in aggregate UK productivity and also seems unlikely to threaten financial system resilience.