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Should the banks back Britain?

Robert Peston | 09:15 UK time, Tuesday, 7 April 2009

A survey of one (me) would corroborate the recent Bank of England assessment of credit conditions, to the effect that banks are providing a few more loans to business than they were and - perhaps more importantly - are being a bit more sensitive to the needs of business.

For me, the change in banks' behaviour may have taken place a month or so ago.

Out of business signBefore that - through the autumn and winter - I would receive a steady number of complaints from small and medium size businesses that banks were pushing them under by capriciously depriving them of borrowing facilities or increasing the cost of such facilities to lethal levels.

It was impossible to investigate all the charges against the banks in detail. But I was persuaded that there was a serious problem.

Banks were not being wholly rational in their decisions about whether to provide vital credit to the supplicant businesses.

Some bank managers were exploiting technical breaches of borrowing agreements or covenants - breaches that really didn't imply that a business was in serious trouble - to demand their money back or screw a massive increase in fees or interest out of the vulnerable borrower.

It's impossible to know how many fundamentally sound businesses were killed off by banks' panicky attempts to cut their losses. But there was a fair amount of collateral damage to the innocent as banks brutally reduced the availability of loans to match the depletion in both their capital and in their ability to raise funds on wholesale markets.

Most at risk were the smaller companies.

Bigger ones - especially those owned by private-equity funds - were (and still are) being squeezed by the banks till the pips squeaked. That said, when it came to these larger businesses, banks' aim was typically to wipe out the equity in the business, push up fees and scoop 100% of whatever value could be realised, rather than kill off the business.

Then, in January or so, the penny dropped for banks with a resounding and deafening clank.

More-or-less all of them realised that they wouldn't still be standing if it weren't for the massive support of us, of taxpayers, in the form of loans, guarantees, insurance and investment (to the tune of about £1.3 trillion of succour from the authorities in this country alone, aggregating these different categories of support).

So if we were propping up the banks, and the banks were simultaneously destroying the economic fabric of the nation, well that wouldn't and didn't seem a fair exchange.

As a result, the message seems to have gone out from bank bosses to bank managers that they must behave properly: killing a viable business to recoup a loan isn't a banking strategy with a long-term future.

That said, if I'm receiving fewer cries for help from companies claiming they're being destroyed by banks, I am receiving an increasing number of complaints that banks are refusing to back sensible, legitimate expansion plans and investment opportunities.

Many companies see scope in the current recession to increase their market share or diversify. But they tell me that raising even modest amounts of additional working capital or longer-term loans from banks is hideously difficult.

If that is a generalised trend, it would be seriously bad news for all of us - because it would mean that banks' fears of taking any kind of new risk would be limiting the creation of jobs, tax-revenues and income, at a time when all three are in short supply.

Of course, the risks of lending rise in a recession, for the obvious reason that the incidence of bankruptcy rises (doh!).

But as an explicit aim of government policy, taxpayers have recapitalised two of our biggest banks - Royal Bank of Scotland and Lloyds - and provided other kinds of financial support to the others, so that they have the resources to lend now that credit is most needed.

All of which means that there is now something of an imperative for banks to demonstrate rather more than they have that they retain an appetite to back wealth creators.

For me, however, the really resonant question is whether we should expect British banks to bend over backwards to help British businesses, as opposed to overseas businesses.

What I don't mean is that they should engage in financial protectionism, that they should retrench back to the UK and withdraw credit from other countries.

In fact, there is quite a lot of that return-to-home banking going on. And, as I've been writing here for some time, this is disturbing - because it represents a beggar-my-neighbour retreat from financial globalisation which is exacerbating the worldwide recession.

Here's the trickier question. In a world of scarce resources, and where a bank faces a choice between competing investment decisions where the potential risks and rewards are similar, should that bank choose the investment that protects jobs and income in the UK?

This may seem somewhat academic.

But I suspect for international banks, it's frequently a genuine dilemma.

The issue was brought to my attention in a recent decision by a specially created company called SeaDragon Offshore, which is funded by Lloyds Banking Group, to switch the construction of two semi-submersible oil drilling rigs from the North East to Singapore.

The contracts would have been worth something over £200m to UK companies and would have supported 1200 or so high-skilled, high-paid construction jobs.

There wouldn't be any kind of an issue here if the construction was always going to be carried out in Singapore. But what's slightly alarming is that the work was originally going to be done on Teesside and was subsequently switched to Asia - and a last ditch attempt to win the business back by a newly created Tyne/Tees consortium has also flopped.

The question for Lloyds is why the risk of doing the work in the UK was perceived, in the end, to be excessive - given that the initial decision had been to place the order with North East construction firms.

And, I suppose, the bigger related question for the senior management of all the big British banks is whether there's any harm in sending out a message to their staff that - all other things being equal - they should look more kindly on requests for finance from businesses that support the British economy.

Or would even mild nationalism of that ilk undermine their managers' ability to make rational lending decisions?

Comments

Page 1 of 3

  • Comment number 1.

    Are these banks as healthy as they would have us believe?

    George Soros has been on Bloomberg and suggests we are propping up "zombie banks" which will prolong recovery.

    http://tinyurl.com/c3u7z3

  • Comment number 2.

    I heard a stat that as much as 50% of the lending within the UK before the crisis was by foreign such as the Icelandic banks. For the most part these foreign lenders are now out of the UK market leaving a big gap to fill Even when a recovery gets underway will the UK banks be able to fill this gap? Will there even be the demand for all of this new credit Gordon Brown wants to get into the system?

  • Comment number 3.

    "Back Britain" - Robert? There are no controls on money movement around the World and many of "Britain's Banks" are just small offshoots of global businesses - so what do you mean?

    Should the British taxpayer be bailing out RBS's foreign business and if not, how do you separate out the British bit from the foreign bit? Your question is impossible to answer for given a World (and a UK) without exchange control I do not see how you can get "Britain's Banks" to support "British Business".

    The upside of being an international banking and finance hub in the good times is inevitably mirrored by the downside of the country's taxpayers having to rescue the banks in the bad times. (And indeed only the most short sighted of financial whiz kids would have seen it otherwise!)

    So unless you are a closet advocate of exchange control I do not see that the question that you ask is rational.

    Banks need to make sensible investment decisions (and businesses should at all times seek to get their necessary finance through the equity markets - NOT bank loans!) If it is commercially sensible, given the prevailing interest rate regime (- i.e. not our present insanely low rates), then banks should make commercially sensible decisions (which they have been appalling at in the last decade or so!)

    Blame the shareholders of the banks for not enforcing rational decision making, by all means, and indeed that is what the share price has done. But we are in a totally uncharted field now of not letting the bankrupt banks go bankrupt and this will inevitably distort the market - in my view catastrophically for decades (just as badly as letting them go bankrupt - it can be argued that it would be better to suffer the short term disruption of bank bankruptcy to the lingering death of the present 'rescues'!)

  • Comment number 4.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 5.

    "Then, in January or so, the penny dropped for banks with a resounding and deafening clank.

    More-or-less all of them realised that they wouldn't still be standing if it weren't for the massive support of us, of taxpayers, in the form of loans, guarantees, insurance and investment


    I don't know if I would go as far as making the banks out to be some kind of white knight as you seem to do above. Let`s not kid ourselves - these banks and only concerned first and foremost with serving their own interests.

  • Comment number 6.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 7.

    Hideously difficult? More likely it's just not 'ridiculously easy' anymore...

  • Comment number 8.

    Robert,

    "Some bank managers were exploiting technical breaches of borrowing agreements or covenants - breaches that really didn't imply that a business was in serious trouble - to demand their money back or SCREW a massive increase in fees or interest out of the vulnerable borrower." (my capitals)

    But that is a) what U.K. banks do, i.e. screw their customers and b) what customers, in the main, perceive banks as doing. (With a few exceptions, but not many).

    Banks don't serve their customers. Banks absolve themselves of all forms of social responsibility on the Anglo-American buzz-line "well, we've here to make a profit". As if making a profit will gain them eternal salvation, or immortality, or the like.

    Well, dear bankers, if you can't make a profit without screwing your customers then you are grievously less competent, less smart and considerably less worthy of the rewards you receive than you deceive yourselves, and others, into believing.

    If the sub-prime loan fiasco is anything to go by, then banks just do not have the skills to make profits by serving their customers and acting in honest and open ways. If they had such skills, then why did they need to sell sub-prime loans, make them out to be Triple A and bundle them together and sell them on in the way they did?

    They would sell their grandmothers if they thought they could get a few bob for them, let alone screw UK businesses and/or float off jobs to other countries.

    The question is - do we really need banks?

    And before you answer just consider that back in Captain Mainwaring's day it was really only the rich and the business community that had bank accounts as we know them today. Lots of ordinary people did not have bank accounts, a few had passbook-operated deposit accounts. Over the years, more and more people had to open accounts to satisfy the administrative needs of employers (to save paying wages in cash) and the benefits system (to reduce fraud). Note, but not because they "wanted" to do business with the banks.

  • Comment number 9.

    'A survey of one (me)'.

    A survey of one (me) has concluded that your flair and desire for investigative journalism is not sufficient for you to be the BBC Business editor.

    Could I suggest you visited some of these people and looked at their business proposals to the bank and formed your own opinion as to whether the banks were being unreasonable or not and perhaps saw enough proposals so that you could compare similar ones with similar banks a couple of months ago and now to establish if there really had been a sea change or not.

    I have a meeting with our bank this afternoon and some REAL concrete news on banking attitudes across the UK could have been very valuable to me prior to that meeting.

    Sadly for me you only surveyed yourself!

  • Comment number 10.

    Bert - they are still at it big style - I know of property which has good debt cover let to good tenants and the banks are nailing companies on the loan to value covenant breach on the back of valuations in a market where there are no transactions happening!

    it is all a bit dodgy as the banks are then ring fencing the assets and tucking them away waiting for a market bounce whilst subsequently telling the government they are toxic and worthless - there is a big bad game going on out there which is costing a lot of jobs

  • Comment number 11.

    Robert has missed the real story. See here, the state Banks are already under orders to increase lending in the Uk and it has been dictated that they are to bail out Government backed PFI and social housing schemes, there won't be much for the private sector. Just the way Gordon likes it.

  • Comment number 12.

    I'd agree with the above... In the end, a bank is a business. I've worked for a few high-street banks, and what gets drilled into you from day one is:

    'This is a business. We are trying to make money like any other business. The only difference is that our business IS money.'

    Sure, in most cases banks are sensible, reliable, and will work from the perspective that they are providing a service as well as a running a successful, profitable business. However, in a time of recession, it's hard to trust a business that works in a field where the raw material it works with is drying up; hence the problem with banks today. I find it harder and harder to trust them!

  • Comment number 13.

    Thank you Robert, for highlighting a very serious problem for businesses in this country.

    Regarding the Tyne and Tees vs Asia issue-I would suggest the cause was massively different costs both for manufacturing and employment.

    Take a look at taxes,wages and working conditions-how on earth can UK companies compete with Asian ones in these fields? Whilst I can understand companies wishing to maximise profits, but something urgently needs to be done to make it less expensive to manufacture in the UK. Again, I understand that the government needs taxes to offset the debt they are incurring with their efforts to support banking and also balance the benefit books. However, surely it makes fiscal sense to reduce taxation to promote UK employment? Surely a lower taxation of companies will create employment and develop an exporting culture is a win win situation?

    More manufacturing=more exports and jobs= more money in the public purse.

    This would also reduce our reliance on financial services as an exportable commodity, stabilise the nation and reverse the current trend of moving labour overseas.

    Perhaps the government could consider tax breaks for keeping/creating jobs in the UK?

    Of course-silly me-this would be called Protectionism. Frankly, IMHO, I can't understand why ensuring employment overseas is considered more important than looking after your own country first.

    No hope really until we make it financially attractive to have industry of any kind in the UK.

    How, on earth can we compete with countries with appallingly low wages, appalling working conditions and much less regulation than we have here? Let alone the financial encouragement for companies to take their operations abroad?!

    An ugly one this, make no mistake.

    Well done Robert - a pertinent and contentious issue.

    More like this please!

  • Comment number 14.

    I am a premier customer with the same bank in UK and in France...the difference is amazing, the UK bank is forever trying to make me take out loans (as if i would borrow my own money?)putting unauthorised charges through, directing me to call centres situated somewhere in the indian sub continent, ...whereas my french bank is very efficient, i can talk to a human being actually based in the branch, they inform me personally of interest rate changes and advise me to move to a better account (unlike the UK which lowers rates and does not tell me) .....why the difference? why does my UK branch go out of its way to screw a customer of over 40 years and yet the french branch are still how i remember banks used to be in the Capt Mainwaring era...i can only put it down to a difference in culture, here in france the customer is valued, in the UK the customer is seen as a profit centre...

  • Comment number 15.

    The Seadragon deal is not an isolated example. There are plenty of others in the oil/gas sector where banks have reneged on, refused or altered loan deals without consultation with the client or consideration as to the impact on UK but especially Scottish companies.

    Our competitors love it of course. The Norwegians in particular are known to be circling around a few Scottish companies ready to pounce but equally so are others.

    There is some additional clarity on this story here...

    http://energy.pressandjournal.co.uk/Article.aspx/1144270/

    and some commentary on the general attitude of Crash and Co towards the energy sector here.

    http://energy.pressandjournal.co.uk/Article.aspx/1133172


  • Comment number 16.

    It took them until Juanuary for the penny to drop! Aren't they thick!

    Here is the terrible problem:
    UK tax payers bail them out.
    They then support business in the Far East rather than ours.
    We go bust - why? 'cos none of have jobs and therefore can't pay tax on what we don't have!

    Would you lend your mate money when you know they are intending to stand-by and watch you and yours perish? In those terms, would you struggle with the decision? It's called being a decent human being. With integrity.

    We all know we are being taken for mugs. Watch the pbs link from the comments yesterday.

    Those rigs should be built as close to the site where they will operate. Why waste the fuel in excessive transportation? Just brings the Peak Oil problem a little closer, doesn't it? Well, it is academic after all.

  • Comment number 17.

    Robert

    Your quote:

    'Here's the trickier question. In a world of scarce resources, and where a bank faces a choice between competing investment decisions where the potential risks and rewards are similar, should that bank choose the investment that protects jobs and income in the UK?'

    Yes - but this is what Gordon Brown call protectionsim as he has not the slighest interest in British companies, workers and jobs because that means his government having to do something real and get their 'hands dirty'. We know that Blair turned his back on the British industry, as well.

    The rampant uncontrolled internationalism and under investment in British industry means that Britain is dependent on imports for most commodities including fuel, energy and many food products.

    Many businesses were lost to the UK because of union disruption, labour and much lower input costs, absence of employment and environmental laws etc - although the mentality to export British industry is the same as the bankster mentality that contributed so much to the current crisis - to USE the UK simply for making money. But the fact is that wages and input costs are much lower in many other countries - we've all prospered (but temporarily) in a bubble on the basis of us being able to purchase cheaper imported goods and having higher wages than overseas to do this. Reality of the cost of not investing in Britain is now setting in and the politicians and banks with their internationalist/non dom managers have played a huge part is destroying the nation's 'engine room'.

    Some of us have been writing on this blog for a few months now with an opinion of the need for a lot more investment in British industry and I think the only chance of getting this is after the general election and it probably requires legislation and the banks 'smashing up' as there are now too many of them in the UK to be effectively regulated.

    You've hit the nail on the head on the head with this one - Ironic, isn't it that Goondog Trillionaire Brown e.g. calls the Tories the 'do nothing party'?





  • Comment number 18.

    Surely, this is a no-brainer for the banks.

    They have been bailed out by the British taxpayer and so their first duty is to the British taxpayer. Even someone as dim as your average bonus-driven banker must understand the simple principle that if you scratch my back then I will scratch yours.

    Or are bankers lower down the evolutionary scale than mere monkeys? Now there is a point worthy of discussion.

    If anything has to be learned from the last nine months is that Britain either swims together or it sinks. The government and the political class have not done much to support that view but it is the first imperative of all. This is not protectionism, it is survival.

    If the bankers fail to look after the interests of their newest shareholder and guarantor, namely the UK taxpayer, then it is the duty of the Prime Minister to bring them all to Downing Street, tell them how it is and if they don't look after the taxpayer then they are all fired.

    Perhaps he could even get the erstwhile Sugar as a third party contractor in the conduct of this matter. He will be quite effective as he doesn't like them very much either.

    The problem is that the political class have also been behaving like a bunch of bankers in feathering their own two or three nests. So perhaps it is time for a bigger change. Now summer is coming I am looking forward to some change.

  • Comment number 19.

    #11 City-Unslicker

    Nice post.

  • Comment number 20.

    #8 Sutara

    Well said!

  • Comment number 21.

    #13 Tigerjay

    I agree with your comments. The problem we have is that Gordon Brown abandoned the manufacturing base in this country a long time ago. He put all of his chips on the financial services and rolled the dice.

  • Comment number 22.

    8. Sutara wrote:

    "The question is - do we really need banks?"

    Of course we do. It is simply not feasible to return to a cash-only existence. How would you pay for your utilities, your broadband connection, your holiday, your car, your Amazon purchases? Bundles of cash in plain brown envelopes?

  • Comment number 23.

    the banks may have survived the sub prime 'hit' whether they can survive the defaults in mortgages,credit cards and personal loans that will come there way in the next two years i doubt very much.millions of people were led into the biggest ponzi scheme going making them believe they were no longer decent working class people but middle class and the world was there oyster borrowing on the ridiculous rise in asset prices and living a great lifestyle.the dream is very quickly beoming a nightmare for many of us who took part in it and we must take our share of responsibility for it but the answer is certainly not more credit [sorry debt ] we have to get back to living within our means or we will destroy the lives of our children and grand children and that is where we should concentrate our efforts.

  • Comment number 24.

    #13 Tigerjayj

    It's not about where the jobs end up - banks don't care. They don't care about their customers, their shareholders or the regulators except to the degree that, on occasion, the banks sometimes fail to deceive them fully.

    It's ALL about profit and, through demonstrating such profit, earning bonuses.

    It is literally a culture of profit at any cost, e.g. your business, your job, your house, your family break-up. That cost can be to whoever or whatever and, as we have see, can even scupper the bank itself, or endanger the national financial industries or indeed the entire global economy.

    If teenagers were behaving with the same level of social responsiblity as some of our banks, then the Courts would be doshing out the ASBOs hand over fist.

  • Comment number 25.

    Hello Robert,

    Reading recent "Picks", I get the impression you are not reporting the bigger issues the way you used to. Todays "Pick", to me, is more of a review.

    Regards recent G20 meeting, I had hoped to see a scathing summary from you by now. I believe the London G20 meeting did nothing in real terms for economies such as the UK and USA
    i.e. IMF cannot do anything until Congress approve the US stake, $1 trillion to poorer countries, what about everyone else etc etc etc.

    Please get back to the big picture. e.g. Apparently the UK budget has already been put back a few weeks.

    I would like to see you becoming more in-depth with before/during/after comments.
    e.g. an 'after' comment regards G20 would have been better suited to your "G20: Road to nowhere" pIck title.

    Regards
    BFB

  • Comment number 26.

    #13 Tigerjayj

    Rather than work to improve the living standards of those trapped in abject poverty around the world our betters have choosen to go for a knowledge economy. Hence increasing University fees and indebtedness of the young before they even begin working!

    Someone remind me, how many countries do prawns visit before they end up in your freezer? Better to use cheap labour and transportation costs.... well, how else do you get ever increasing profit margins if you are a business leader?

    Don't forget what a problem environmental, health and safety, etc regulations are here in Europe. If you want a job, a proper job and an economy then risk your health, life and your environment....



  • Comment number 27.

    Banks dont have customers, we have no where else to go. 90% of Banks and Governments are incompetent, relying on the 10%, who are competent to drive them.
    We have been led to believe there are systems designed by genius to be used by idiots--us. This is their culture. In reality we have systems
    created by idiots and we are just realising this.

  • Comment number 28.

    Hmmmm - my post 9 not accepted. I've seen other people complain in past about not getting posts accepted and not being sure why.

    All I said in a fairly rationally exlained way with no bad language was that I did not feel that a survey of one was sufficient or investigative enough and that as I have a meeting with my bank manager this afternoon a more comprehensive piece with real detail in on changing or not changing attitudes would have been very useful to me.

    Do I get to find out why my post was not accepted?

  • Comment number 29.

    Probably means post holders work to closely defined parameters.
    'Dont lift head above pond level'


  • Comment number 30.

    it has just been confirmed that the UK taxpayer now owns 70.3% of RBS....i thought under stock exchange rules a holding of over a certain percentage triggered an automatic take over bid...!

  • Comment number 31.

    I feel that you once again miss the point Robert

    Banks have never been wealth creators.

    Banks have been facilitators of credit that allowed entrepreneurs to exploit opportunities. The banks then took their fees, but at no time have the banks been that of "wealth creators" because these fees could impinge upon short term profitability.

    Until you open your eyes to this simple fact, you will not fully understand some of the frustrations out in the economy.

    I do, however, agree with the fact that it appears disingenuous for the banks to be pulling the plug on viable businesses strangled by the withdrawal of recapitalising banks, when they themselves have been bailed out for their ineptitude that would have seen "their bank manager pull the plug"

  • Comment number 32.

    #22

    I'd pay my bills the same way my family have done for generations! You might want to re-read the post you are taking issue with.

    Haven't you ever seen a postal order? Didn't your grannie give you one for birthdays? Haven't you ever been to the electricity company and handed over cash to pay a bill? Never held the wee brown packet in your hand? Crivens!

    I didn't need a bank account for my first two jobs in the '80s. My mum pays all her bills without the aid of a bank. The bank account she has to get her state pension doesn't allow for direct debits, online payments etc. She's never written a cheque in her life!

    What banking facilities do you think they have in sub-saharan Africa? People run businesses there and pay their bills all without bank accounts, so no you do not NEED a bank account. Your boss just doesn't want to pay you in cash.


    Until the government forced through child benefit and pension payments into banks most of the people in my community didn't have a bank account, ever!

  • Comment number 33.

    8. At 10:08am on 07 Apr 2009, Sutara wrote:
    Robert,
    .........
    Banks don't serve their customers. Banks absolve themselves of all forms of social responsibility .....
    ......... just consider that back in Captain Mainwaring's day it was really only the rich and the business community that had bank accounts as we know them today. Lots of ordinary people did not have bank accounts.....

    Well said.

    It reminds me how arduous it actually is to open a new bank account nowadays (prove of ID, address...) and all because THEY are worried about us (Money Laundering) when all the time WE should be worried about them (Asset Laundering)

  • Comment number 34.

    Surely we are against all forms of protectionism? So no, I do not think it is the inherent duty of British banks (even bailed-out banks) to support British businesses.

    However, I am not sure it is the business of the British to support banks - even ones that are nominally British.

  • Comment number 35.

    Aggressively predatory behaviour on the part of the banks is precisely why the entire system should be nationalised -- so that if bankers are behaving like rampaging monsters, there is some public recourse.

    A bank destroying a perfectly viable business should be a national scandal, not business as usual.

    We're stuck with the banks, in order to function financially. We've paid through the nose to keep them alive.

    They should be likewise stuck with us.

  • Comment number 36.

    Obtaining funds from our banks for manufacturing expansion in the UK has been 'hit and miss' at best in the good times and downright difficult now. One of the chief culprits for the reluctance to lend to manufacturing is the ridiculous claims from all politicians that the UK has moved on from manufacturing and is a knowledge based, financial services orientated, economy.
    God help us!

  • Comment number 37.

    ‘Back Britain’, ‘dilemma’?

    I cannot believe you are suggesting that our banks, have gone all of a nice all of a sudden and want to help Joe Plumber!

    Welcome to Peston’s blog, home of Doom, despair and government propaganda!

  • Comment number 38.

    32. CoralBloom wrote:

    "I'd pay my bills the same way my family have done for generations!

    Haven't you ever seen a postal order? Didn't your grannie give you one for birthdays? Haven't you ever been to the electricity company and handed over cash to pay a bill? Never held the wee brown packet in your hand?

    I didn't need a bank account for my first two jobs in the '80s. My mum pays all her bills without the aid of a bank. The bank account she has to get her state pension doesn't allow for direct debits, online payments etc. She's never written a cheque in her life!

    What banking facilities do you think they have in sub-saharan Africa? People run businesses there and pay their bills all without bank accounts, so no you do not NEED a bank account."


    The way we've done for generations? The way your dear old mum pays her bills? The way it's done in sub-Saharan Africa? is that what we should be striving for?

    That's just silly. Today's sophisticated way of life requires something more sophisticated than cash. Yes, you can pay some of your bills in notes if you really want to traipse down to the bank or post office and hand them over. But how do you pay for your online purchases? How do you book a flight on the internet? Your TV licence? Your home contents insurance? How will you buy and sell your next home? Do you take huge bundles of cash when you go abroad?

    I'm not disputing that banks need to clean up their act. But, like it or not, we need them (or, rather, the facilities that they provide).

  • Comment number 39.

    There is one real underlying issue here - and it's the one highlighted by Soros today. It relates to the scarily-unquantifiable commitment by governments here and in the US to rescue every significant consumer-facing bank and financial institution from insolvency and collapse.

    While this pledge clearly has a strong rationale, the massive problem is that the Treasuries both here and in the US have no real idea what quantum of financial burden they are committing themselves to. As I've said before, there are probably trillions of dollars worth of as-yet unrealised derivatives losses sitting deep within these banks. Indeed, the desperate government-led attempts to shore up asset values could well be viewed as a way of trying to mimimise these derivatives losses (all derivatives are linked ultimately to some sort of asset, and most of the toxic derivatives were dependent on rising - or at the very least stable - asset prices).

    So we may very well have got ourselves into a situation where our governments have made essentially open-ended commitments to bail out banks, and this commitment may end up costing governments (i.e. you and I) multiple trillions of dollars/pounds. Soros does not have a history of saying alarmist things simply for effect, and many people in the know have been echoing his warnings for some time now. I really don't think that governments have ANY idea of the hole they are digging for themselves and their taxpayers right now.

  • Comment number 40.

    "(to the tune of about £1.3 trillion of succour from the authorities in this country alone, aggregating these different categories of support)."

    Are you sure it's "succor" and not "sucker" (i.e. us, the taxpayers) ??

  • Comment number 41.

    "For me, however, the really resonant question is whether we should expect British banks to bend over backwards to help British businesses, as opposed to overseas businesses."

    Robert, isn't there an old saying - he who pays the piper calls the tune? It's all very well for theorists and economists to be up in the clouds but down here on earth money represents more than a display of numbers on a screen and I would like to get something for it. By that I don't mean a contribution to someone else's Mansion House lunch.

  • Comment number 42.

    Robert,

    Excellent article.

    It is now 20 months since Northern Rock dislayed all the evils of the modern banking business and what has been done other than a lot of luke warm air being blown down the wind ?

    The UK banks are taking the p**** out of this useless government with taxpayers money whilst restoring their diminished equity values and storing up money to declare as profits.

    Nothing of substance appears to have happened because UK banks still do not know how broke they really are, only pathetic overpaid clerks would still be in this situation, certainly real businessmen would have made substantial progress in the past 20 months.

  • Comment number 43.

    As I see it at the moment, the UK government is the majority shareholder in two large banking groups that represent the back bone of UK corporate and retail banking and everyday lifestye financial administration; the system of monetary exchange. Once private and loosely regulated, now a state owned and political football.

    These institutions now possess "fully written down??" assets effected in the current accounting period [but not written off] and are charged with managing these books to a conclusion to better the current written-down value to the benefit of us all. The "disaster" if any is in the proportionate success with this excercise.

    Recapitalised, the banks' immediate cash flow problems are over.

    So, back to business as usual. This means that inherently profitable enterprises capable of writing off billions in the half year and still breaking even can go about the business of clawing it all back. Two to four years.

    In the commercial and retail sector this will be done with our help as we go about the business of financing our projects and servicing our debt. In this respect borrowers can expect a more cautious approach not so much because banks have been imprudent in the past with this type of lending but rather than as a direct result of the economic circumstances generated in the profligate trade in financial instruments.

    This trading has made us all weaker. We do not now look like a good bet to lend, our potential markets in business are depressed, our employment prospects privately are uncertain, therefore all forecasts should be low with a high probability of failure in the current climate coupled with a potential low rate of return.

    Under these circumstances [Albeit generated by the failure of the banks themselves.] new lending to businesses and individuals can be expected to be problematic.

    Breaking the loop needs to be gradual. Financial leeway needs to be given by the banks at the margins of existing credit agreements to be flexible rather than imprudent thus initially gently facilitating trade and everyday life and the revival of business as usual. New lending needs to be judged on its merits.

    In truth, tha banks owe us nothing. There has been a political decision to take us to the current state of affairs and it is not possible for a nation to easily disagree during the course of an elected government. So here we are, hopefully in a position to start again.

    Patience is a virtue, but we have already been impatient, opting for massive fiscal stimulus of as yet indeterminate destination, availability and effect.

    Bank rescue and fiscal stimulus together in a short period of time have created a massive distortion in the market on a global scale. We are in for an erratic and bumpy ride over the next couple of years.

    Patience, a gentle return to well judged lending and a more prudent approach to the trading in and availability of complex financial instruments are the cure. In the UK this means concentrating on the housing market, financial services and technology based industries and managing expectations. Accept the way the economy is currently construed. We will always be good at our strengths, which we let lapse. We need time to return to our strengths, before we examine any further weaknesses.

  • Comment number 44.

    "The question for Lloyds is why the risk of doing the work in the UK was perceived, in the end, to be excessive"

    Perhaps it has something to do with the wildcat strikes recently. There is no such thing in Singapore and the managers can plan accordingly !! In a project of that size, every day's delay could mean a large loss !!

    Therefore, we have the strikers to thank for the loss of this project !! No British jobs for no British workers !! Great going, guys !!

  • Comment number 45.

    State owned banks can lend recklessly because their owner requires it. The moral hazard is now well established with them and these banks will do as their owner wants knowing they will not be allowed to fail.

  • Comment number 46.

    Banks do not, and are incapable of, taking rational decisions at a local level. Bank managers (so called), are very strictly controlled and work to very clear and inflexible guidelines. These guidelines are decided 'on high'. Senior managers and bank directors (local and above)know exactly what is going on...they are the puppeteers.

    Banks are not the least interested in the effect of their actions on people or on business. Banks have spent the past six months shafting perfectly good businesses...and they care not. Bank managers will have been keeping a low profile (being 'between branches' is the term most commonly used)while their minions do the dirty work and field the frustrations of their desperate customers.

    There is no such thing as a friendly bank manager. The sycophantic dance that business managers have to perform to stay on the right side of some boring, low calibre nonentity is one of the crosses they have to bear. It's a heavy one. When the chips are down all the sweet talk and so called 'friendship' counts for nothing.

    We know very little about what has really been going on. Chambers of Commerce and the CBI have been particularly useless at highlighting the contemptable actions of the banks. Shame on them. Hopefully one day the story will be told.





  • Comment number 47.

    Since most of the work on the offshore contracts would have been outsourced to cheaper EU labour I doubt whether performing this work in the UK would have the beneficial effect on UK jobs that you cite.

    As for painting the picture that banking bosses have suddenly had a twinge of conscience, hmmm. Methinks the government put a rocket up their backsides.

    As #31 quite rightly states, bankers don't wealth create, they channel money. If they are not going to channel the money, we don't need them.

  • Comment number 48.

    I wouldn't say banks are being more sensitive towards business needs - despite using 15% of its annual turnover to reduce its overdraft from £6.5m to £4.1m (with the target of £4m well within reach), Barclays have still pulled the rug from under Southampton Leisure Holdings plc, the parent company of Southampton Football Club.

  • Comment number 49.

    If this government had been given a mandate to fix the problems created by the banks, we would be where we are now.


    In very deep trouble,


    The full effects of the pointless bailouts are yet to be realised. British taxpayers have assumed responsibility for foreign debts on British balance sheets (public balance sheet). What happens when they go bad? Print more money, just keep on printing……


    Hi Ho,
    Hi Ho,
    It’s off to the IMF I go,
    (whistle whistle)



    Essentially they could not have made a bigger botch job of it, if they tried!!!

  • Comment number 50.

    Off Topic (Please ... because this is desparately important!)

    Robert, I listened to John Humphrys interview the Home Secretary this morning and remain horrified at the attempts by her and others to somehow justify fleecing/screwing/shafting/stuffing/robbing (call it what you like) the taxpayer in the way that these people do. Bank lending is one thing, but if the electorate is being robbed blind we need to get our priorities right.

    Can we keep up the pressure on these politicians please? I own and run a small business and cannot afford to settle my tax liability for FY07-08. I shall have to dip in to my personal savings to inject cash in to my small business so that my company's tax can be used, er, to fund the enviable lifestyles of the likes of Jacqui Smith and others. How does this work exactly?

    My family's summer holiday this year will be a week spent in a tent in Scotland (the children were asking to visit Canada: fat chance). I'm finding it really difficult to stay calm as I hear and read more and more about the huge gulf between the lives led by our political elite (ha!) and the likes of ordinary, very hard-working, decent people who try to live their lives not only by the rules, but also with a basic sense of right and wrong.

    Surely, it's wrong that politicians take our money and live the high-life at our expense; they must realise this? Where do they get the brass-neck to justify it (like Smith tried to this morning), and how can Gordon Brown then say he's too busy to deal with the matter? What the hell's happening here?

    Making banks lend is one thing, but for me the overriding matter of the moment is this absolutely fundamental issue of politicians daylight robbing its citizens. I'm incandescent with rage having listened to that woman this morning in the context of my own business and personal circumstances.

  • Comment number 51.

    38, rbs_temp,

    I beg to differ with you, if you look up the word need and apply it to banking you will find that humans do not need banks in order to live and survive.

    I cut up all credit cards, paid off a 0% finance deal on a suite, took the lot out and paid down my mortgage. The only Direct Debit I have is for a mortgage (and I’m cancelling that in favour of a postal order).

    The purpose of this?

    To show the bank that I do not need them, every month taking my cash out on day 1. They cannot charge me for unpaid DD’s or anything else and nor can they lend my money out on ludicrous reserve ratio multiples.

    Joe Plumber is fighting back………….

  • Comment number 52.

    The banks could make a positive contribution, but they choose not to.
    They are happier creaming off a pile of money as it passes their desk. They don't create the wealth, didn't create the business opportunities or take the business risk.(until they got lazy, over-greedy, and pooped in their own nest)
    Brown was happy taking his slice of tax off their theft.... shame on him.

    It is the banking SYSTEM that has to change. Just like politicians in power for too long (Tory or Labour). They start to believe their own publicity, and treat everything as their right. They just get corrupt.

    It must be human nature for some reason. If you get too comfortable and protected, you get greedy. Must be a mother-nature type thing, and nature presumably expects you to eventually get picked on when you get too embarrassing, and then you become a victim.

    I'm OK with that concept. Their time is over, make them back into the clerks they used to be, and all they are capable of. Then they might care a little more about their home-town, local economy, and fellow citizens.

    Regards,

  • Comment number 53.

    But it's not just small business. I recently went to Nationwide with a view to taking out a relatively small loan to meet a shortish term need.
    Because using facilities on my cards seemed expensive, I thought I would investigate alternate means.

    I have an excellent credit record; adequate income to meet repayments but after something like a half hour inquisition I was told "Yes, I would get a loan of £2000 over 2 years ... at 24.7% APR.

    As their basic deposits attract an interest payment of less than 1% this seemed an extraordinary rate.

    To me, the loan was a matter of convenience, not necessity, but I have to question their reason for being in business if this is how they see their
    business opportunities.

    It goes almost without saying that I walked out.


  • Comment number 54.

    Peston writes : "... there is quite a lot of that return-to-home banking going on... this is disturbing - because it represents a beggar-my-neighbour retreat from financial globalisation which is exacerbating the worldwide recession. What's known as "globalisation" is merely an idea that's so weak that the only way for it to survive is to promote it to an unquestionable axiom. Let's de-axiomise it for a moment and question it’s theory and evidence. Globalisation means, through Ricardo's Comparative Advantage and all that, little more than "let's specialise". As any stockbroker will tell you, if you specialise too much in your investment portfolio you may well have higher profits for a short time but at the cost of instability (“you’ll be broke in a few years time”) - in old money it's the warning “putting all your eggs in one basket”. ‘Selected Numbers’ getting bigger over a short time cannot be evidence for the success of the WTO - you have to look at evidence over the medium and long term. We are now in the medium term and we a flat broke and we are all going down together - I hardly think it's 'disturbing' that people are starting to say "maybe this Globalisation was not such a good idea after all". What would be ‘disturbing’ if, despite things being bad and getting worse, people ignored the evidence of their own eyes and bank accounts, and kept listening to defunct economists : “It’ll be all over by Christmas !” – Huh heard that one before. www.worldnews.blog-city.com PS "Financial Globalisation" - what Peston actually mentions - is merely a device to allow the Chinese to 'trade' with us without us ‘trading’ with them so Ricardo’s “Comparative Advantage” can't even get started in the first place – we buy their stuff, they buy our mortgages and government bonds so we lose all our industry and end up in massive debt.

  • Comment number 55.

    I remain baffled as to why there is so very much being read into so very little evidence to support any of the claims made in this article or a great many published elsewhere. Ever heard of "Occam's razor"? This says that, all things being equal, the simplest explanation is usually the right one. In the case of banks, they took taxpayers money and kept it for themselves so that they could at least appear profitable on paper. They then clawed back every penny they could from creditors good and bad to cover any losses (or even any risk of losses). They have now decided that maybe they should lend again, but on a small scale and to whoever appears the most creditworthy (British or otherwise).

    There is no question of nationalism here: a bank will only lend to the "dead certs" of this world, regardless of their geographical location. There is no point in us non-bankers navel gazing about this. The bankers certainly aren't!

  • Comment number 56.

    Lloyds banking Group agreed to increase lending to credit-worthy UK households and businesses by 14 billion sterling by next March 2010 - 11 billion sterling to UK businesses.This was part of the Asset Protection Insurance. Here, you seem to be asking whether Lloyds should have required a Cayman Island registered client to award its contracts to a UK business in the North East as part of its funding offer, rather than to a Singapore subcontractor.

    Why would the Cayman Island client want to do this if it didnt make commercial sense, unless Lloyds had leverage on them ? G20 have banned this stuff, havent they. The Cayman Island client, equally, could place his business with another non-UK bank. HM Treasury, being a shareholder, wouldnt be happy with that, would they?

  • Comment number 57.

    Moraymint

    Absolutely!

    There are so very many SME's in your situation. There are times when many owners/directors take no wage and/or put their own money into their businesses (very often adding personal guarantees) in order to ensure their businesses keep going and their staff still have their wages. The staff don't particularly care about the directors/owners as they just want to be sure they have a wage for another month. There must be hundreds of people like you whose own families suffer to take care of their staff. The alternative is to shut the company down-and then everyone is on the dole and awaiting repossession if their homes because there are no jobs to be had.

    The arrogance and ignorance of politicians as you describe is so disgusting it makes me feel physically sick. They have absolutely NO connection with the day-to-day struggles of the electorate. Where is their sense of responsibility to others?precisely how are they struggling to make ends meet? Exactly what cut backs are they making?

    Rhetorical questions-we know the answers.

    If they were in our shoes, they would be doing a monumentally huge job of helping businesses like yours.

    Can you imagine what would happen if they had to run the public finances as a small business does? A taste of this medicine would need more than a spoonful of sugar to make it go down!

    They don't get it, do they? Who exactly provides the monies for the public purse which pays their wages?!

    Humility, prudence, moral hazard and respect are not words that can be used in the same sentence as politics.

    Government and banks need to wake up to small businesses, not try and save the big greedy PLC's. They may be top of the food chain, but who feeds them?!

    A pertinent fact the 'high ups' seem to have forgotten, methinks!

    Don't give up Moraymint. You are not alone-if enough of us shout we may be listened to eventually!

  • Comment number 58.

    #55 Dave_NW

    Well said!

  • Comment number 59.

    Like people, banks are not able to change their established character in a matter of months. They are simply acting in what they perceive to be their own interests.

    If they foreclose on businesses and mortgages the value of their balance sheets must be written down. Their insolvency would be exposed for public scrutiny.

    As in the USA, recently received public funds (and loans) are being used by the banks to buy each other's toxic debts (at face value). The payments generate interest, commission and insurance benefits to the banks. The good part of the toxic debt benefits the bank and we the public pick up the cost of the bad part.

    The net effect is a massive transfer of toxic assets to the government and an equally massive transfer of public wealth to the private sector. No change there then.

  • Comment number 60.

    #51 JavaMan1984
    Bravo!

  • Comment number 61.

    Post 50 agree with you 100% re Jackboot Jacqui and the attempt to justify the expenses. For those that haven't read or heard it the following is a BBC friendly version of the story

    http://news.bbc.co.uk/1/hi/uk_politics/7987102.stm

    Obviously her concept of fair and reasonable is somewhat different from yours and mine.

    If she has to pay for two houses as she claims has her sister put up her share of the tv, sofa etc.

    Just a thought, and very naughty it is, but if we as the tax payer have paid for lots of things in second houses when labour MP's get the boot next election can we reclaim all these tv's hifi's etc that we have paid for at second holmes or do they get them scot free to take "home" with them?

  • Comment number 62.

    I don't understand how those 'fundamentally sound' and 'viable' businesses went bust simply because they couldn't borrow enough money to keep going. That doesn't suggest to me that they were either 'sound' OR 'viable',just propped up by debt. Whatever happened to businesses growing through reinvestment of profits & raising money by issuing stock when necessary, instead of prostituting themselves to the loansharks of Lombard Street/Wall Street?

  • Comment number 63.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 64.

    rbs_temp

    You may be amazed to find out that it's not actually all that long ago, and certainly within the life times of many on this board, that most people were paid in CASH and spent CASH on items. They were not paid by credit transfer, they did not use credit cards, they did not have big loans and they did not have mortgages as most people rented property prior to the era of Maggie Thatcher.

    But the banking and finance industry manipulated this to their advantage allegedly because of the dangers of handling cash (Bank blagging, Great Train Robbery, Wage Snatches, etc., etc.).

    But oh how convenient for them that this way of doing business makes it much easier for them to make money out of you for overdrafts, loans and credit cards - because they effectively have electronic 'control' of your money.

    And the security issue? Well guess what, we now have lots of cyber-crime, id theft, etc., so it didn't really make that much difference.

    Oh and don't believe the banks' competence the way you seem to. When Credit Cards first started having the holograms (for security) the forgers were able to do the holograms better than the companies making the cards for the banks.

    Cash under the mattress is probably not signifiicantly less safe than electronic money in a bank account anyhow. It may not make any interest, but at least banks won't hit you for charges for it. (Have you noticed how all these "new" bank accounts have monthly charges just for having an account, or huge overdraft fees?)

    Banks lie, cheat, deceive and mis-lead people left right and centre for one reason - profit. Don't expect anything more from them, because they don't actually deliver it. (With the exception, probably, of the so-called ethical bank sector).

    And the real reason they have been propped up by HMG might just be that there are too many people in the sector to be allowed to end up on the dole and bank branches closing all around the country would probably spook people into civil unrest.

  • Comment number 65.

    12. moneymouth77

    The problem being, of course, that the stuff banks deal with is the very stuff they pay with and the measure they use of success. It's a crazy situation that's bound to end in tears. It's like asking Augustus Gloop to guard the chocolate.

  • Comment number 66.

    Re #50, Moraymint:

    The putrid stink of corruption isn't just coming from from the likes of Jacqui Smith, it's endemic in the big banks and financial institutions too. For me, the real scandal of Fred Goodwin's pension was that none of the people who negotiated it and approved it thought there was anything amiss; they have got used to a culture where it's acceptable to help yourself to bucketloads of other people's money, no questions asked.

    I would be rather less livid about the bank bailouts if I thought that some of the banksters and politicians who got us here might suffer some consequences as a result, rather than being lavishly rewarded, just as unemployment in the real economy heads past 3 million.

  • Comment number 67.

    I think the government gave the money to the wrong people. Had they given it to the people to spend/invest or pay off personal debts, the banks would still have gotten their hands on most of it but the general population would have been in a better position.

  • Comment number 68.

    # 57 tigerjayj

    Thanks for your support. It's such a serious matter. I've been around a bit (in the nicest possible sense) and I have never known our national politics and politicians to be so unremittingly, dismayingly awful as they are today.

    For this we can, without question, look to the set of values and beliefs instilled in Government over the past decade or so by the bandit trio of Blair, Brown and that unelected creep, Alistair Campbell. Our society today has the Blair/Brown/Campbell DNA plastered all over it - and it stinks to high heaven. It'll take a generation for us to recover economically and socially from the havoc that has been wreaked by Labour and its weird and, ultimately, lethal form of 21st Century pseudo-socialism; the Party will be wiped out at the next election.

    My concern is that the political alternatives do not exactly inspire confidence.

    By all means, let's fix the banks. But above all else, let's fix politics, for whilst our politics and politicians remain as disastrously detached, incompetent and corrupt as they are today, we're wasting our time with economic technicalities.

  • Comment number 69.

    My goodness! Where have all the right-wingers (right whingers?) gone who accuse Robert of being in the pay of Labour? All those vitriolic rants about nothing?

    I occasionally like to read a few of the comments if for no other reason than to remind myself of the stupidity of people who would rather go down on a sinking ship than sail on a ship whose captain was clad in anything other than blue, but Sutara (comment #8) has ACTUALLY MADE SENSE! This is very probably the best comment I've seen on any of Robert's pieces.

    #33's 'money laundering versus asset laundering' is also a very valid point.

    #51, I applaud you for giving it a try! I'd be interested to see how long you are able to maintain your efforts (maybe this is a piece of informative journalism that someone could undertake?).

  • Comment number 70.

    moraymint

    Your comments are 100% spot on. It`s a pity we can't scrap the banking system and political system and start all over.

  • Comment number 71.

    Robert,

    Alistair Darling said in January " In the UK, the total amount of lending available still falls short from meeting the needs of the economy.

    Over the last ten years, lending by foreign banks and non-bank institutions accounted for over half of new corporate loans and 45 per cent of new mortgages here.

    So a significant amount of lending capacity – by these foreign-owned banks and specialist lenders for example – has been withdrawn or has been returned to their home markets, demonstrating again the need for coordinated international action."

    The BoE Asset Purchase Facility was announced to aid corporate borrowing by the buying of Commercial Paper and corporate bonds from banks. This, together with loan guarantees for SMEs was to go a long way to restore the lending deficit. The APF results indicate the following :-

    1. BoE have bought 329.045 million sterling corporate bonds
    2. BoE have bought 2 billion sterling corporate commercial paper
    3. BoE have bought 18.993 billion sterling gilts

    What has this done to increase lending capacity in the real economy? Have the banks just hoarded the proceeds? With respect, it is these operations, and their success, which should be subject to public attention and debate, rather than ethereal questions posed by your post today.

  • Comment number 72.

    RBS to shed another 9000 jobs - half in the UK.

    Take the money and sack the workers - they really have developed a conscience Robert.

  • Comment number 73.

    Another post which is little but spin. From labouring the Goodwin pension ad-nauseum, to this:

    "So if we were propping up the banks, and the banks were simultaneously destroying the economic fabric of the nation, well that wouldn't and didn't seem a fair exchange."

    Was that a bit of dictation from Gordon Brown? It makes no sense for Banks to do anything other than rebuild their balance sheets. You want the banks to 'return to normal' - well it was that lending that got us into this mess.

    Forcing them to lend in order to help Brown and Labour win an election is reprehensible, but of course par for the course with this government.

  • Comment number 74.

    A few facts:

    1) All banks are bust - none of them have come clean about how bad their toxic assets are, there again noone has asked them! The select committee was pathetic as they only asked things which they understood eg Goodwin's pension
    2) The reason the banks are not lending is fear of failure and so nationalisation - they are protecting their salaries/bonus and pension funds. It is simply a job protection scheme from the top
    3) The Govt have not yet forced the banks to do anything, even where they are the major shareholder; the reasons are the same - self preservation/avoidance of error and ignorance of how things really work.

    Solution -
    a) nationalise all the banks and the govt run them
    b) When the recovery starts split the banks to "normal low risk" and "merchant banks" and sell off accordingly. Never again should the high st banks be exposed to the potential losses from the traders

    Why none of the above will happen - because we have Brown and Darling running the show (and Mandleson of course!)

    Answer : General Election now!!!!!!

  • Comment number 75.

    MMMM... not so sure that things are getting rosier Robert. I have a mortgage brokers shop in Sheffield. It was starting to struggle (obviously) last year so we branched out into property management/lettings. This has gone great and effectively saved the business, not only do we have a healthy P&L and a sound plan for the future we also have full audited accounts etc, basically everything the banks ask for. After being refused a loan from B.O.S for lack of security (I only want to re-finance existing borrowing at a more competitive rate) I said how about lending me the money under the much lauded Enterprise Finance Guarantee scheme? uh um uh....we're not ready to do those yet why don't you try one of the other banks was the reply!

    Flabbergasted I did try, got an appointment at Lloyds where after much sucking of air through teeth and trips out of the office to see the manager the business manager came back in joyously clutching a piece of paper....I'm afraid here in our rules it says that with EFG loans we can't re-finance another banks debt.

    Have you forgotten you now own HBOS I pointed out! He went very red and said...looks like you've got me there but why don't you just try your own bank one more time.

    It's a joke, and don't even get me started on what bank charges they whack me with every month. They even charge for paying in cash over the counter on top of everything else. Its diabolical, it's unfair and it's downright wrong.

    I have a sound business, I work hard as does everyone else here, we're not asking for some pie in the sky amount for a risky venture that may end in ruin.

    I'm just asking for a fair banking system that helps small businesses succeed rather than shafting them at every turn.

  • Comment number 76.

    We have not even begun to tackle the real problem with the banks, and the government quite obviously does not intend that we should. The real problem is that give and take a few big names, the banks are run by the same appalling people who ran them into the present crisis. They are as morally bankrupt as their coffers are financially bankrupt. They belong in gaol and not in executive chairs. They live in a little world of self-absorption quite isolated from the rest of the world, and plan their new depredations while we prattle on about trivia.

    They know the financial markets and they know the economic situation. They can see what poor well-meaning little Obama is too callow to see, and what the devilish Gordon Brown refuses to admit he sees, namely that they have rolled the dice once too often in the western world casino and have destroyed it, probably forever. They know that the centre of gravity of the world is shifting, economically and financially, to the east, and they are getting in as quickly as possible to create a new eastern base for their operations. If you understand that, you will understand why the likes of Seadragon Offshore has been brought into existence, and what is in store for the future. Look forward to a great many more Seadragons Offshore. Britain is finished, and so is the USA; the banks know it, and they are taking the money and running east, where, given time, they will manage to destroy its viability as well. Except, of course, that there they may get the come-uppance they richly deserve. In the East they do not mind executing people for economic crimes.

    Now to the really important point, that everyone simply ignores. The Bank for International Settlements estimates the derivatives out there at $500tr. The IMF estimates them at $400tr. I will call no one a liar for a mere $100tr, a trifle in the overall scheme of dark deeds and murky filth. Whatever the exact figure might be, both of these are reputable, well-informed, institutions with no axe to grind in the matter; clearly the figures are horrendous. They exceed the entire value of world assets many times over. Good grief, will people never wake up! There is NO fiscal measure, no stimulus, no bailout of banks that can succeed, because the numbers are impossible to deal with. The bankers know that, so they are meeting local needs a little better to deflect a modicum of opprobrium, and at the same time they are setting themselves up to leave a decaying Babylon for their new home in the east. And do not even think that there is a possibility of our being bailed out by the IMF as happened in the seventies. The IMF has a trifling budget compared with the debt out there. It can barely bail out a couple of small eastern European economies, let alone someone like us, with the debts like ours.

  • Comment number 77.

    #38

    The way we've done for generations? The way your dear old mum pays her bills? The way it's done in sub-Saharan Africa? is that what we should be striving for?

    Yes she is very dear, actually.
    And what is it you think we shouldn't strive for? You have nothing to learn from Africa?

    That's just silly. Today's sophisticated way of life requires something more sophisticated than cash. Yes, you can pay some of your bills in notes if you really want to traipse down to the bank or post office and hand them over. But how do you pay for your online purchases? How do you book a flight on the internet? Your TV licence? Your home contents insurance? How will you buy and sell your next home? Do you take huge bundles of cash when you go abroad?

    What's silly about not allowing a great big monolith control your cash?
    Doesn't have to be sophisticated. Folk manage to run businesses all around this world without the banker's kind of sophistication.
    What's wrong with a bit of fresh air and a walk down to the bank. Good for your health too, a bit of walking is.
    What online purchases?
    Why book a flight on the internet? Travel agent does a very fine job for me. Her name is Kathy, very nice, friendly and efficient woman.
    Local post office gives me a very easy means to pay for the TV license. Pretty walk there too.
    Doesn't your insurance agent come round every week to collect his money? We use the post office.
    Don't own a home so don't need a bank for that.
    The next one I buy will be a cash sale. In cash.
    Yeah, I take cash on holiday. Tried the bank thing in sub-Sahara Africa. The advice from the bank about the card being acceptable wasn't true. Expensive lesson for me, though I did close the account asap. My driver was so annoyed too. It was more than an 800 mile drive across two national borders to get to the nearest bank. That bit of plastic was just such a pain in the butt (it's called an African Massage on those roads)! Never again! Though the drive through the mountains and volcanoes was a stunning sight. Magnificent.

    Sorry, but you did ask. Now you know.
  • Comment number 78.

    well the banks are in the same boat as our government morally bankrupt along with being poorly lead by persons who seem only interested in their own pockets.
    i agree with 74 we need an election now more than ever but to be honest can any mp be trusted after the last 15 years of greed and self promotion.
    nothing is safe in these ecconomic times and it surprises me the government has not placed a tax on air, if you have so many windows open you pay so much a door is so much more etc, this would give the coffers a boost.

  • Comment number 79.

    It's not British banks' job to back British business, it's the British Governments. British banks should be free to lend to whoever they think gives the best balance of risk / reward.
    I suggest that the government should be insuring new loans made to British businesses by any bank, as opposed to new loans made by British banks to any business. This would also encourage foreign banks to lend to British business.

  • Comment number 80.

    What an utterly stupid and pointless question.

    Of course the banks should back Britain; it was Britain, after all, which backed them.

    Where would they be without the British taxpayer?

    And where will they eventually be if no one in Britain has money banked with them?

    If the banks don't want to lend to Britons, then let them go under and arrest their bosses (making up some law to do so).

  • Comment number 81.

    52 'allmyfault' Cheers great post, just what I wanted to say but I doubt I could have been as concise and to the point.
    Luckily for me I can read a lot faster than I can type I have no problems reading all the posts on this blog.
    I have really laughed,learned and enjoyed some of the stuff that's been posted here in the last ten months that I have been logging on(even if a lot of the stuff I don't agree with).
    RP doesn't really do it for me, but the general cross section of the population that post here on a good day always make it well worthwhile. Power to the People

  • Comment number 82.

    Robert,

    I work in a small business which has been thankfully riding out the downturn with a healthy cash balance and a steady trickle of orders. However, looking into our crystal ball, it is highly likely that we will need some funding within the next 12 months or so.

    With our current bank (one that is now majority-owned by the taxpayer) seemingly reluctant even to arrange a meeting with us, let alone have a discussion on financing, we have been courting other banks to see if they are willing to lend. The only product they are interested in talking about is the Enterprise Finance Guarantee scheme, which is supposedly underwritten by the Government. All well and good, I hear you say, but they will only offer this form of lending if we offer the banks 100% personal guarantees, and in exchange they will charge us a margin of between 4 and 10% over base rate.

    With the previous incumbent, the Small Firms Loan Guarantee Scheme, the risk was 75% with the Government, and the banks bore 25%. Now it seems that the banks are taking on 100% of the risk by demanding 100% PGs and yet we are still expected to pay the same 75% insurance premium to the Government! Is it any wonder that the take-up of this new supposedly taxpayer-backed form of financing is so poor, but with so many businesses needing the support? Once again, this is empty rhetoric from Mandelson and his cronies, who don't appear to be living in the real world!

  • Comment number 83.

    Oh Moraymint - you are so spot on with your comments. I commented on Pestons blog about Fred's pension on Friday:

    "90. At 11:27am on 04 Apr 2009, Lambo51 wrote:

    Sir Shred's pension is immaterial, so is the outpourings of the G20. Why don't we just write off the mortgage debts of those affected - quicker and simpler and restart a much simpler economic model. As it stands we are going to reshuffle the toxic debts - the rich get richer and the poor get poorer. As for me - I go under in about two months. What a future for the kids...."

    I entirely empathise with the tenor of comments that there is a bunch of politicians running this country that are money-graspers fleecing the oiks to their own ends.

    Help!

  • Comment number 84.

    #75 skoyne
    And all the other SME's.

    During the '80s the communities hit really hard with the destruction of their industries got together and created Credit Unions.

    I've no idea if it would be worth thinking about, but couldn't all the small businesses get together and create a Credit Union for Business? If that could be pulled off, it would mean you could cut out a lot of those rip-off charges.

  • Comment number 85.

    They have already started to back Britain, here ya go Roberto!

    http://news.bbc.co.uk/1/hi/scotland/7987659.stm

  • Comment number 86.

    As if on cue ...

    "Last September, the FOS said it had "very severe concerns" that many complainants had been fobbed off by their banks."

    from http://news.bbc.co.uk/1/hi/business/7987123.stm

  • Comment number 87.


    32. CoralBloom wrote:

    I'm not disputing that banks need to clean up their act. But, like it or not, we need them (or, rather, the facilities that they provide).


    I agree with Coral Bloom, we do need the facilities the banks offer us. In the world we live in we NEED those facilities. The problem I have is the people who are responsible for the facilities. If only we had banks, with these facilities, that the public owned a large share of..... :D

  • Comment number 88.

    #64. Sutara wrote:

    "You may be amazed to find out that it's not actually all that long ago, and certainly within the life times of many on this board, that most people were paid in CASH and spent CASH on items. They were not paid by credit transfer, they did not use credit cards, they did not have big loans and they did not have mortgages as most people rented property prior to the era of Maggie Thatcher."


    Far from it; I'm not at all amazed by that. But times change: the fact that society was able to function just a couple of generations ago by solely using cash does not mean that it would be desirable or even possible to do so today.

    The way we live in the 21st century would not be possible if it were not for electronic payment systems. Try paying for that next Easyjet flight, or your Sky TV subscription, with a bundle of notes.

  • Comment number 89.

    #80 scotbot

    The banks will back Britain to the extent that they can reap healthy profits from Britain. As it has already been pointed out, the banks raked in hugh profits and a large part of their business from outside of Britain before the S### hit the fan.

  • Comment number 90.

    The bank never have and never will 'back Britain'. When will journalists like Peston stop putting false boundaries around everything so they can make them easier to digest into their tiny brains. When will you get it? No amount of regulation will stop this happening, every single time you claim it can be controlled - but it cannot. This is the Chaos of Capitalism and the beast which is out of control.

    Until you start looking at the fundamentals there is no point in reading this blog Robert - you keep coming out with reasons and complicated stories of how the Economy might be turning.

    Read the JK Galbraith book - The great Crash - it's all in there, if you change a few details (Investment trust = Hedge fund) you could easily be reading about the last 10 years and not the 1920's. I hope an educated man like yourself would have read this by now.

    Banks are multi-national and and no loyalties except to those who run them.

    The biggest progress in Banking was made on April 1st when RBS got smashed up. All we need to do now is smash the rest and the world will be a much better place.

    There will be 2 types of people in the future - those who woke up - and those who sleep-walked their way to doom.

    I am awake and alert and ready for the next phase - oppression by the ruling class to retain control. It's going to be a bloody year I'm afraid..

    Why don't you concentrate on real Economy stories? Factories are being occupied by workers for the first time in hundreds of years - surely this is a sign of things to come?

    P.s. I told you the FTSe would fall once the G20 data was decyphered. Now it will be in a slow decline for a long, long time...

  • Comment number 91.

    53,

    I bank with the nationwide, see an earlier post on here as to what I did. They took all the interest I was getting on my savings, then upped my gold credit card interest to a whopping 19 odd per cent (I had a zero balance but you get my point). My savings reduced to .95%, so I took the lot out cut up all my cards paid everything off and the rest sits in my house. (Only a few k anyway).


    The long and short of it, I cannot miss a DD as I have NONE, nor can they lend out MY cash at circa 19% so they can give me back 0.95.

    Joe Plumber is fighting back, I tells ye.

  • Comment number 92.

    #88 rbs_temp

    "But times change: the fact that society was able to function just a couple of generations ago by solely using cash does not mean that it would be desirable or even possible to do so today."

    EXACTLY!!

    But times change: the fact that society currently functions by using credit and plastic and electronic money transfers does not mean that it would necessarily be desirable or even possible to do so in the near or medium term future.

    Recognise that things will have to change again and that banks are again becoming more irrelevant to more and more people.

    In the final analysis, with a wad of currency in your pocket, you might just be able to buy something to ensure your survival. Be certain that in the case of a serious event such major political unrest, war, or other disaster, financial processing centres will be closed, computers and networks will switched off and your electronic money will just be frozen - inaccessible to you.

    But, of course, the bank bosses will be o.k. they'll manage to survive - on your money.

    Oh, and if you are one of the people laid off by RBS in the latest round of proposed redundancies and you end up on Job Seekers Allowance of £121 a fortnight, that probably won't stop your bank charging you perhaps as much as £10 or £15 a month for any overdraft facility you have.

    Don't you just love these banks?

  • Comment number 93.

    Globalisation unfortunately has probably reached a tipping point of no return for the mature Western Economies.That is ,the costs of globalisation in terms of capital investment and job creation are now higher than the benefits they create.The more capital investment sent to Asia and emrging markets the less is employed here and it appears that the quid pro quo for that of lower costs has virtually disappeared.

    If the West is not to become totally stagnant it must buy some time so that Asia and emerging nations do more to develop their domestic markets to the benefit of all lest they suck us dry of investment in doing so.Loath though I am to suggest it I think to achieve that we should be considering some form of exchange controls as a minimum. If we simply leave it to free enterprise there will be no limit to the number of decisions similar to the SeaDragon quoted in this article.

    Global free trade is a nice concept ,but actually it's hardly more than a theory because different economies do interfere in this process to satisfy their domestic economic needs and it's likely they always will.
    So should we.

  • Comment number 94.

    Protectionism is fine when it comes to commerce and private business but the banks are funded by our taxes. And our taxes MUST be invested in overseas businesses and foreign public services. They must not be wasted on benefits scroungers, teachers, nurses, civil servants and other various wastrels in the United Kingdom.

    I think the education and health budgets should also focus on supporting schools and hospitals in other countries rather than in this mean spirited focus on the UK and its subjects.

  • Comment number 95.

    Joe Plumber can win this one if we all want him to.

    Other less dramatic steps for people who don't like sleeping on their money.

    We could choose one bank - say the Cooperative Bank although personally I've no idea if all the ethical investment stuff is relevant to how they do business - any bank will do.

    Then on a chosen day everyone (including companies with cash) goes to all the other banks and draws out their money and moves it to this one bank. This effectively causes a run on all banks bar one forcing

    1) Government to nationalise all other banks or let them go bust.
    2) Our bank of choice to have all the funds.

    We (being the public with all our deposits in one bank) then issue our requirements to continue to bank with this one bank.

    Far far more effective than marching round London and far less dangerous for our good police.

    All we need to do is film the campaign plan for You Tube and organise amongst the people on this site to give it loads of hits - once the hits start coming the threat of this being carried out will cause the action we require to take place.

  • Comment number 96.

    #43- Ericmiltonjohn

    You are absolutely correct- credit will not appear overnight. This will take time as loans mature and over-leveraged businesses build a more viable capital structure. But that is not enough for most people on here who get some great kick from repeating that everyone who works for a bank must be inherently stupid, should be flogged…. ad infinitum. My take on a few of the points raised in no particular order-

    Bank control- UKFI (ie the Govt) effectively have RBS and Lloyds in a firm grip. They are majority shareholders and as such the bank will do as they are told. It will take time for these changes to take effect as the loan book gradually rolls over. What to do with maturing loans outside the UK is a sensitive issue, but it would be madness to completely exit these countries where ultimately business is profitable- this would destroy the value of the money invested by the government. These banks have committed to increase UK Lending (a legally binding commitment) although it is unlikely to plug the gap left by retreating foreign lenders. The message is ‘share the pain’- expansionary plans will need to be backed to a reasonable extent by equity- the days of businesses growing with much greater equity upside than equity risk as banks pile in massive amounts of debt are over.

    Volition- Pretty much everyone in these colossal organisations is at the whim of the board who are, in turn, driven by UKFI as main shareholder. These people are not all idiots (I know that’s a real disappointment to many of you), and will do their job in the way they are told. Last time I checked, an employee’s role was to do their job- the mechanics of banking are essentially the same, but the dynamics have changed. Where to lend and how risk-averse this lending should be is ultimately a function of the strategy put in place by the board and UKFI. Banks of course look after themselves first, that is how they have set up as businesses, just as all their clients do likewise for themselves. That’s not to say all banks care about is getting their money back. Long-term relationship banking is ultimately far more profitable than smash-and-grab. This is no revelation (apart maybe to one or two former bank directors)- the key is to ensure that job roles and incentives mirror this approach.

    Profit- Banks are not hoarding cash to make a profit- they make profit by lending. Banks have increased their capital ratios significantly in order to provide more headroom for future economic shocks. Last year the banks were ill-prepared for the downturn. Not all of the injected cash was used for lending, a good slice of it was used to build the capital reserves so that the banks are now in a much better shape. In any case, if RBS made a stonking great profit, then 40% of that would go to as tax straight away, then 70% or so of the remainder to the government through UKFI (if they so desired to receive a dividend).The remaining tranche of equity is mainly owned by pensions companies- so that’s making up in some small way for the battering the pension funds received when bank shares tanked. Any staff bonus would be part of the government deferral and clawback system announced a couple of months ago by Darling. While I am wary of disappointing many of you, there would not be a parade of bank staff waltzing off into the sunset with pockets stuffed with twenties.

    Rightly or wrongly these banks have become supertankers and it takes time for them to change direction. We all need the captains to keep a cool head in rough seas.

  • Comment number 97.

    #93

    Crash and Ally's idea of global free trade is that everyone else designs, develops and makes all the stuff so that we can buy what we want when we want it from them using credit (debt) provided by the glorious British financial services sector.

    RBS? Bizarre that last Friday at the shareholders gig the management didn't know how many jobs would be going but today they do. Smoke and mirrors.

  • Comment number 98.

    #9 add me to your survey, also you can add the whole BBC, as they are there like the banks to surve themselves and not the British people.

    labour running the banks is like labour running British leyland.

    Remember the Early TR7 a sports car with a marina gearbox. QED
    (they used the door handles on the Disco200/300)

    I have a later one (SD1 gearbox etc) , just cos I love there looks, along with BSA's Triumphs velocettes etc, just because I'm insane too.

    All Built in Britian.

    BL ended in dissaster Lord Bob seems to have exclude that from his survey of one, mayhe is too young to remember pre 1979.

    Many bloggers think pre 79 was a wonderland.

    As a 12-15 cannot remember exactlty I wrote to Mr T.Benn to help save the beloved Triumph motorclyes. Niave yes but they were lovelly was not really interested in the fact not many people wanted to buy them , they all wanted Honda, Yam's etc.

    thankfully Mr Bloor came along laterly to save the day, but I still prefer the older ones though, design icons.

    governements running buismess never works and banks they have no chance, they should have been left to go under. Then we will come out of this much quicker. And not have a distorted playing field.

    They need breaking into smaller units that cannot bring havoc if one goes down. Then they will lend sustainably. but also we need to run buisness without the use of huge piles of debt, sea change required

  • Comment number 99.

    Banks more sensitive to the needs of business? You should have posted that one on April 1 Robert.

    Banks are worse than ever in my experience. A very recent application to extend my business overdraft was approved but they wanted to increase the rate of interest from around 8% to 17.5%. Fortunately they were so slow in processing the request that by the time I discovered the rate they wanted to charge I no longer needed the facility. I was told the overdraft was cheap next to their current loan rates which are more like 20%. To put this in context I have a long-established business that has in ten years never posted a loss and may even do better this year than last. Now I have a healthy balance on which I am paid next to nothing. The banks are blow-torching the candles of every business at both ends. I have never had less trust in and respect for banks (and my opinion of them has never been very high).

    Even if what you said were true the very fact that they have been pursuing such a short term strategy of pushing some good businesses under and stripping all the equity out of others shows a level of greed, amorality and shortsighted incompetence akin to that which brought us the sub-prime crisis in the first place. If businesses can't make money banks, in the end, can't either. I've yet to meet a banker that fully understands that.

    I think bankers are rather like dogs. Dogs tend only ever to think about one of two things, food or, ahem, procreation. Bankers spent so much time sewing their capital wildly and irresponsibly they are now exhausted and starving. Cue one massive and rabid feeding frenzy in which taxpayers and business alike are having chunks ripped out of them with no more thought to the consequences than was given during the sub-prime binge.

    Perhaps if you were running a business Mr Peston you'd be more keenly aware of what banks are actually like from a business-person's perspective. If bankers had any clue about running business they wouldn't be in the mess they're in now. And, tougher regulation or not, history will repeat itself since we still have broadly the same characters running the banks.

  • Comment number 100.

    One reason the banks won't lend is because they are still in one heck of a mess and are desperately trying to restructure themselves.

    The government policies have now led to such confusion even they themselves don't know what they've done.

    Even trying to make any sense of the present mess with the lack of any strategy or even a sketch plan for the way ahead is downright impossible.

    No-one can sell a business few can sell a house so what have banks got to lend against?

    Even more toxic assets?

    People keep asking for positive news.

    Well if the sun is shining go for a long walk and and you will see lots of green shoots. But not the ones you are hoping for.

 

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