In the letter, Mr Walker urges the Prime Minister not to prejudge the findings of next week's publication of the Independent Commission on Banking (ICB) report and not to make decisions based solely on the views of a small, albeit highly influential group.
The ICB report was commissioned by the Government to honour a pledge in the Conservative Party General Election Manifesto in which it said it would ‘reform the regulation and structure of the banking system'.
In recent weeks the banking lobby has claimed proposals would have a detrimental effect on the economy. However the FSB’s letter says a recent survey has found that 71% of influential City figures believe that it would be a bad idea if the Government took no action.
Furthermore, Mr Walker questions how the most recent debate - led by the banks - has omitted to talk about the issue of competition. The FSB has called for more competition in the sector for many years and believes that the Financial Conduct Authority should be given powers to promote competition to ensure that small businesses are given a fair deal.
John Walker, National Chairman, Federation of Small Businesses, said: "Having commissioned a report into the banking sector, it is very disappointing that the Government is now looking to water down the findings before the ICB has even reported. We were promised radical reform, but it now appears that this has been downgraded to ‘light touch' regulation after 2015, if we are lucky. This is simply not good enough.
"Small businesses have had a tough time at the hands of the banking sector - with more than a third of businesses missing their growth opportunity as a result of being refused credit.
"The Government courted businesses with promises of reform and it is time that they stood by those promises. Without urgent and radical reform the banking system will never change and those businesses needed to help pull the recovery onto firmer ground will be left to struggle."
