The Lending Standards Board (LSB) is set to close on 31st October 2025 following a decision to wind down operations.
The organisation acted as an independent overseer of lending practices for business customers in the UK, including small and medium-sized enterprises (SMEs).
The closure followed the withdrawal of the largest high street banks, which said the Financial Conduct Authority’s (FCA’s) Consumer Duty was enough to cover all customers, including SMEs.
The LSB argued that its business standards were the only independent framework in place for SME borrowers.
While some SME-focused lenders stayed signed up in 2024 and 2025, the exit of the biggest banks left the LSB with no choice but to close.
Emma Lovell, CEO 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 long-term 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, said: “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 areas not covered by statutory regulation.
“It has placed pressure on other firms that recognised the value of registration but found it harder to justify engagement without the continued participation of major high street lenders.”
Scott added: “And it has ultimately undermined the commercial viability of the LSB’s Standards and Codes – affecting not only the customers of those who withdrew, but also those served by firms that remained committed to independent oversight.”
In 2024, the LSB reviewed how business standards were being implemented and found 102 areas where firms were not compliant, which exposed SMEs to risks.
Most issues related to customers in financial difficulty or vulnerable situations, and firms’ governance.
The LSB said without these standards in place, these risks would likely not have been dealt with; in addition, its work with ethnic minority-led businesses also stops with its closure.
Research found that only 19% of ethnic minority-led SMEs who applied for lending in the past year got the full amount they asked for, compared to 58% of white British-led SMEs.
90% of ethnic minority-led SMEs said they had challenges when applying for lending, compared to 69% of white British-led SMEs.
44% of ethnic minority-led SMEs made a complaint about their lender in the last year, over double the 19% of white British-led SMEs.
There were moves to set up a new voluntary code for ethnic minority-led businesses, with support from business groups and policymakers.
With the LSB closing, this work is now paused, and the framework risks being lost.
Lovell added: “Our experience shows that responsible oversight and sustainable growth go hand in hand, a view shared by the firms that have chosen to remain registered with us.
“Trust and confidence are essential ingredients for long-term success and there is a real risk that the hard-won lessons of the past are being overlooked.
“Since our establishment in the wake of the financial crisis, the LSB has played a pivotal role in helping the financial services sector grow responsibly – setting and overseeing best practice, raising standards and delivering meaningful improvements in outcomes across SME lending, personal lending, financial inclusion and fraud prevention.”
She said: “The LSB was formed to make sure people were protected from financial risk in areas not covered by statutory regulation.
“Any observer of our rapidly changing financial sector can see that such protections are still needed.
“We are grateful to all those who have supported our mission over the years, whether through registration, collaboration or a shared commitment to better outcomes for consumers and businesses.”
She added: “While the LSB’s operations will cease later this year, the principles we championed – fairness, transparency and independent assurance – remain as important as ever.
“Our legacy will endure in the standards we set, the firms we worked with and the outcomes we delivered.”
