The UK’s biggest banks should use the £7.5 billion of cancelled dividends and bonuses to write off debt repayments for retail and business customers affected by the coronavirus, according to Manchester-based investment platform AJ Bell.

The Bank of England, the UK’s central bank, has welcomed moves by Royal Bank of Scotland and Britain’s other biggest banks including Barclays, HSBC, Lloyds Banking Group and Santander to suspend dividends amid the coronavaris crisis.

Kevin Doran, chief investment officer at AJ Bell, said: “The big question following £7.5bn of dividend cuts by the UK’s largest banks is what are they going to do with the money?

“Now would be the ideal time to repay the British public for the bailout the banks received during the financial crisis by writing of debt repayments for a period of time for those most affected by the Covid-19 crisis.

“The gross revenue generated by the UK banking sector from interest paid on debt by consumers and companies is around £28bn per quarter on a total loan balance of around £1.9 trillion.

“£7.5bn would go a long way to providing debt relief for the individuals and businesses that will be unable to make interest payments over the next three to six months, cancellation of share buybacks and banker bonuses would go even further.  

“This could bring massive relief to families, ease fears of insolvency for businesses, take pressure of employers to lay off staff and ease the burden on the public purse, which is currently being lined up to subsidise the wages of furloughed employees.

“Even if the entire £56 billion interest income for six months was written of it would represent a provision against the loan book of just 3%.

“The alternative of seeing some businesses collapse would surely entail far greater losses on the loan books.”