Not to mention that the banks are biased and giving no risk handouts to their most valuable clients (those at greatest risk of defaulting on obligations to the bank).

"existing customer" due diligence seems like fair profit...

Even then, SME clients don't do operations (like loan applications) with their banks every month, so that doesn't mean the DD is up to date (bank regulations change almost on a weekly basis).

Yes, but the point is DD was done (last year or today). Effectively the government is paying the banks for the work they've done creating a relationship with the clients, which includes DD.

Because they are giving the corporate handouts to customers who are at the greatest risk of defaulting on loans to their own bank - that's their incentive.

The loans are guaranteed but you can still pay $ sanctions for not doing the work right.

From Matt Levine:

> Big banks that paid billions of dollars in sanctions after the 2008 financial crisis for flaws or omissions in loan applications -- in that case, mortgages -- assumed paperwork submitted to the SBA would need to meet high standards, or they would risk getting in trouble again. Wells Fargo has been under particular pressure to show that it overhauled its internal controls.

Now that wasn't in the end the case as:

> Some were floored when the SBA posted a notice on its website on Tuesday, confirming that’s necessary but saying that “lenders who did not understand that these steps are required” didn’t need to withdraw applications already submitted. That essentially gave an edge to lenders that had skipped that time-intensive step to get their customers’ applications in first.

But that was (some of the) banks' view.

Banks paid sanctions for failing to do due diligence on loan applications, that's what the banks want to avoid this time round.