Small business gets a break from U.K. bank

By Sean Farrell
Bloomberg News Service

LONDON — Barclays Plc, the United Kingdom's third-biggest bank, will offer small businesses a choice of interest or reduced charges to meet a British rule that requires lenders to give businesses a better deal.

"For some, lowering their bank charges will be the key driver; for others, the emphasis will be on earning interest," Mike Rogers, Barclays' managing director for small business, said on the company's Web site.

Britain is forcing Barclays, Royal Bank of Scotland Group Plc, Lloyds TSB Group Plc and HSBC Holdings Plc to charge less to small and medium-sized businesses. They are the four biggest British lenders to those customers and have 84 percent of the market with about $67 billion in zero-interest accounts.

If businesses opt to receive interest on their accounts, London-based Barclays will pay 2.5 percentage points below the Bank of England's base rate — the minimum required under the government's rule. The British base rate is currently 4 percent.

Barclays is Britain's second-biggest lender to small companies with 21 percent of the market, according to government figures for 2000.

The government said in March that the four biggest lenders to small companies must offer interest, free banking or a choice between the two. Barclays is the first to let customers decide. HSBC, with 15 percent of the market, and Lloyds TSB, with 19 percent, have said they will pay interest on small-business accounts.