CabinetSecretary for Financeand SustainableGrowth
John Swinney MSP
Sir Fred GoodwinChief ExecutiveRoyal Bank of ScotlandRBS GogarburnPO Box 1000Edinburgh EH12 1HQ7 November 2008Dear Fred
I thought it was important that I write to you at this time to emphasise the ScottishGovernment's commitment to maintaining confidence in the business sector in the currenteconomic climate. I fully appreciate that the banking sector is currently facing unprecedentedglobal circumstances and is fully engaged in facing the resulting challenges. However Iconsider it a priority to minimise the impact of the current economic climate and in particular,to address the emerging concerns associated around demand and supply of credit.It is extremely important that businesses with good prospects can access the necessaryfinancial products to enable the business to grow. As you will be aware, the ScottishGovernment was elected on a mandate of change with a strong commitment to reinvigorateScotland's economy. While Scotland has been outperformed by small European nations inthe past, the Scottish Government wants to reverse that trend once and for all. To do so weneed to inwlve the private sector in partnership and we fully recognise the contribution theprivate sector can make to increasing sustainable economic growth. However in reachingtheir growth aspirations, Scottish businesses need to be underpinned by a strong reactivebanking community providing valuable cash resources.We are seeing an increasing number of representations from businesses raising concernsabout accessing affordable finance from the banking community. I would find it reassuring tobe made aware that the banks in Scotland are fully utilising all available sources of funding,and ensuring any benefits are being passed onto customers. For example, the EuropeanInvestment Bank has made substantial resources available to assist the banks with SMElending. This was outlined at an event last week by Philippe Maystadt, EIB President, whoexplained how the SME loans work, explained the improved and simplified reforms to theproduct, and the benefit to banks and business. I recognise that it is for each individuallender to decide whether the EIB facilty adds value but I would encourage you to considerthis option. Another option which might be appropriate for some SME customers is invoicediscounting. You will be aware that we changed our standard terms and conditions ofcontract to allow suppliers to the Scottish Government to use factoring and invoicediscounting without prior permission.