On the BBC's Andrew Marr Show on Sunday, the chancellor said that the weakness in the banking system was one of the biggest problems in the UK and that the Treasury was considering a government-backed framework to bring together existing finance schemes.
The system will not necessarily follow the blueprint of a traditional bank, but rather rationalise existing lending programmes, such as the recently-launched Funding for Lending initiative, and become a one-stop shop for private sector businesses to determine what support is on offer.
The ‘small business bank’ would also aim create an independent network of professionals to work with the private sector in developing solutions to help small businesses, which Osborne described as the "innocent victims of the credit crunch".
It is not yet certain whether the proposed bank will receive extra funding from the government but a Treasury spokesman said that further details on the scheme would be released with the autumn statement.
The British Chamber of Commerce (BCC) has drawn up a case for the state-backed British Business Bank following George Osborne’s announcement, which it said had given its long-standing call for the small business bank a "boost".
The proposal states that the scheme should "not cannibalise but complement" existing banks and lenders as a "first port of call" for fast-growing companies with current difficulties accessing finance.
BCC director of policy and external affairs Dr Adam Marshall said: "The BCC’s proposal envisages a wholly-new British Business Bank, rather than the conversion of any existing financial institution owned by the taxpayer.
"Ministers have a golden opportunity to pass enabling legislation for a business bank this autumn, and to dedicate their attention to ensuring that it is operational before the end of this parliament. A business bank isn’t the answer to economic stagnation in the short-term, and the government must be careful to get the set-up right the first time.
"But a business bank would be able to help prevent a repeat of the financing difficulties faced by many companies since the credit crunch. What’s more, a business bank could help many new and fast-growing companies become the UK’s future champions."
