This will give six commitments to help small business borrowers that are facing financial difficulty.

TSB has made the pledge in the hope that other banks will follow suit.

In the pledge, the challenger bank will commit to:

• be fair and transparent in everything it does, keeping the customer informed as to the course of action it is taking and why
• give customers reasonable time to return their business to health
• not raise loan margins on existing facilities if a business enters into financial difficulty
• not default a business if it is up to date on its loan payments, but a valuation change impacts a covenant
• not demand full repayment or remove an overdraft unless a business has breached its terms of lending
• not run its business support unit as a profit centre and not incentivise its partners for additional income earnt on accounts in business support.

Richard Davies, SME banking director at TSB, said: “Small businesses need firm commitments to ensure they get fair treatment when they need it most.

“That is why we are offering a new lending pledge.

“The issues of the last decade have shown there is a need for greater protections for business borrowers, and we hope that the rest of the business banking industry will follow suit.”

Kevin Hollinrake, co-chair of the All Party Parliamentary Group on Fair Business Banking, added: “It is refreshing to see a financial institution breaking from the crowd and recognising the need for extending the regulatory perimeter to include business customers.

“Most businesses simply do not realise that they have very few rights when they borrow money from their bank, and we hope that these pledges will help to raise awareness of this fact.”