Business still being crunched by banks
The chief executives of our biggest banks have been summoned to the headmaster's study on Monday morning.
Alistair Darling, Peter Mandelson, Shriti Vadera and Paul Myners will grill the bosses of Royal Bank of Scotland, Lloyds, Barclays, HSBC, Santander and Nationwide about whether they are lending enough to support an economic recovery - and, in the case of Royal Bank of Scotland and Lloyds, whether they are lending what they promised when kept alive by a massive injection of public funds.
Those who run our banks tell me that they're doing their bit, that they're supplying the credit to businesses and households which is being demanded. And if the official and unofficial statistics show that there hasn't been a great surge in lending, well that's because (in case we hadn't noticed) there's a recession on and there isn't a great demand for new loans.
Hmmm.
Here's an extract from the Bank of England's summary of business conditions compiled by its agents, which was published yesterday:
"The Agents' sense was that contacts' experience was becoming increasingly polarised as lenders sought to focus their activities on the least risky credits. That would be consistent with ongoing reports of tight limits being applied to banks' exposures to some sectors - notably, the property and construction sectors and some retail activities. There were further widespread reports that spreads and fees were being increased sharply on renewal or review of facilities."
To translate: there's less credit for business and it's more expensive.
And this anecdotal evidence was supported by the Bank of England's statistical analysis of lending by our biggest banks (published on Monday), which showed that net lending to British businesses remained negative in May: the three month annualised contraction in the provision of loans was a non-trivial 5.4% (or growth of minus 5.4%, for those who think in that way).
In fact for business, the statistics show that 2009 has been the year of the credit crunch rather than 2008. Last year, lending to business continued to grow, albeit at a much reduced pace. It's only this year that there has an actual shrinkage in lending.
The other absolutely vital point is that in 2007, well over half the growth in lending came from foreign-owned and specialist lenders - which have disappeared from the market completely. So companies are now wholly reliant on the old-established British banks, which are - or so the Bank of England reports - lending considerably less.
To state the obvious, there isn't a great sense of common cause or national purpose between the banks on the one hand and the government and Bank of England on the other on how to revive the economy.
There remains tension in the relationship, reflecting the banks' need to return to what they see as a sustainable level of profits and the authorities' fears that any recovery - as and when it comes - could be choked off either by the inadequate provision of credit or by the excessive cost of borrowing.
You might well ask (as Stephanie Flanders has been doing so eloquently in her recent notes) what all this tells us about whether the Bank of England's ambitious quantitative easing programme to inject new money into the economy - by buying gilt-edged stock - has had any significant positive effect other than to help the Treasury finance its yawning public-sector deficit.
That said, it would be wrong to say that there are serious credit constraints on all businesses. Big companies have been by-passing the banks and raising billions in new equity and loans - in the form of bonds - from institutional investors. And the very smallest companies also seem to be treading water reasonably well in choppy conditions.
It's the medium size businesses - those with a few tens or a few hundreds of employees - for whom the credit crunch remains a very harsh reality.
They are too small to disintermediate the banks and go directly for finance to investors. And they are too big to be considered by banks as a relatively modest risk.
Anyway, I would imagine that Darling and Mandelson will bellow at the banks that they have to do more for the important bedrock of our economy, those middling size companies - by at least advertising a little bit more effectively that they remain open for lending.
That said, there are some huge intractable problems here, which Monday's meeting won't go anywhere near to solving.
The first is whether the price of credit matters.
As I understand it, the governor of the Bank of England thinks it does, and is tearing his hair out that banks have taken advantage of the fall in funding costs that he's engineered by widening the gap between what they pay for money and what they charge for it.
The Banks think he's exaggerating the problem and misunderstanding what's going on.
They would argue that the cost for them of raising funds - from retail depositors or in the form of state-guaranteed finance - hasn't fallen by nearly as much as the reduction in the Bank's policy rate.
Also, they'd point out that they were charging far too little for finance during the boom years; that, as Mervyn King has pointed out many times, that they stupidly underpriced the risks of lending, and that all they're doing now is trying to put a proper price on risk.
But what if the Treasury mandated those banks wholly or partly owned by the state - Royal Bank, Lloyds and Northern Rock - to cut the cost of loans?
Well, the banks' disheartening reply is that if the independent banks, the likes of HSBC, Barclays and Nationwide, were being undercut, they'd simply quit the marketplace, and then we'd really know the meaning of a credit crunch.
Then there are the final, final points, which I've been belly-aching about for two years and are the most troubling of the lot.
Which are: first, that households, business and the public-sector have borrowed far too much; and, second, that the banks themselves became far too dependent on unreliable wholesale credit which - when that disappeared - was replaced by loans and other forms of support from taxpayers.
Just take households for a moment. They (we) have borrowed a record-smashing sum equivalent to around 175% of our disposable income, up from 100% in 2000.
We'd had eight years of continuous economic growth in 2000 - a long stretch by any standards - so a one-to-one ratio of debt to disposal income might well be a sensible, sustainable ratio.
But just think what that implies about how much more households will have to save over the coming few years, and how much less they (we) should borrow, if we're going to return to some kind of stable equilibrium.
In that context, what we should be hoping for from the banks - in the case of mortgage finance, for example - is not that the banks massively increase net lending, but that they provide what little credit there may be to those widely perceived to be in most need (first-time buyers, for example).
What's more, if we were to take the contrary view, that current levels of lending to households and businesses are perfectly reasonable and in fact should be increased, there is only one potential source of incremental lending: that's us, taxpayers.
Here's why.
Much of the growth in lending to households and businesses in the three or four years before the credit crunch began in 2007 came not from the accumulation of stable retail deposits but from the repackaging of debt into bonds plus other wholesale sources.
After securitised bond markets closed down almost two years ago and other sources of wholesale funds became difficult to procure, we the taxpayer filled the breach - with a mixture of direct loans and guarantees for borrowing by banks.
The Bank of England estimates that the gap between customer loans and deposits reached £800bn in 2008. It has also confirmed that the increase in taxpayer support for our banks since the crisis began has been £1.26 trillion or 88% of our economic output, GDP (compared with 73% in the US).
As I've said many times before, if we want to our banks to be weaned off the life-support machine provided by us, by taxpayers, then banks have to borrow less - and that means the amount they lend will shrink, very significantly.
Right now we appear to be as far from ever from reconciling the conflict between the short-term imperative that banks lend more, in order that the recession isn't too prolonged, with the equally important long-term imperative that they lend considerably less.
I'm 
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I hope the government does not push RBS and Lloyds to lend more money than is sensible, because that sounds awfully like the kind of thinking that got us into this mess
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Is there anyway that we can promote and sell cheap loans for the rest of this year and the beginning of next year so that we can have a mini boom before June 3rd say?
Not too bothered what happens after that.
Not for me of course but this worried looking Scottish bloke down pub has just started his holidays and wanted me to ask.
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Yes, and ..... banks should behave like good corporate citizens, they should be forced through their banking licenses to plan and operate according to longterm business plans, to abandon their tax evasion schemes and, generally, to serve the societies they operate in.
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Oh really?
Well isn't this just like history taught us?
Credit crunches cause the longest type of recession, and just as this one has, the crisis in the banking system is miniscule to the damage to the underlying Economy.
The banks cannot drop their rates as they're trying to repair the holes in their balance sheets.
Businesses cannot afford to borrow at the rates on the street.
Something has to give - but only one of the players is backed by the Government.
So who's your money on?
I'm expecting small businesses to start folding in huge numbers soon.
Only the big company job losses make the headlines but small enterprises are nicley 'hidden' from the media.
I wonder if Shriti Vadera will be asked where those "green shoots" are that she saw back in January?
Seriously though - ministers / baronesses / lords should be SACKED for making such outrageous claims and locked up for treason as it misleads the country.
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But it seems mortgage lending is on the way up along with retail spending which presumably involves some credit.
So it would seem once again the banks are doing the wrong kind of lending in defiance of logic.
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Robert,
I quite enjoyed your analysis and I'm glad to see I'm not the only one belly-aching. Your "great sense of common cause or national purpose" seems to me the very heart of the current problem - although, being French, I'd take a larger view of "national". We are all in the same (sinking) boat, give or take small differences in recklessness.
The purpose of banks is merely to act as time machines, and provide the financing to make possible now what months or years of saving would only have allowed later otherwise. Everything else are technicalities. As long as banks see themselves (and/or are seen by governments) as "generating revenue" and creating riches, we are not out of the woods. Banks and enterprises, big and small, must pull in the same direction, and not try to make profit at the expense of the others.
I remember something I studied in Latin, a discourse called "Apologue of members and stomach" (Google for Menenius Agrippa) that is quite appropriate to current times.
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At the height of the "boom", "flare up", or "bubble", (whatever you want to call it), I was offered over £90,000 in credit card loans, a similar amount in personal loans and goodness knows what they would have advanced me in mortgage.
I could not have paid back ANY of this, but that did not seem to bother them.
Millions did take advantage of these offers, hence our current mess.
On a visit to a retail outlet centre yesterday, I noticed that the place was busy, with plenty of customers around, and they were buying.
But the prices were way down on last years or earlier.
Businesses are adapting, and one thing is key.....you can't sell anything if it's over-priced, and that applies to everything from houses to shirts.
Small businesses are the life-blood of the UK economy, and this trend may increase.
The City must not "sting" them too much, or the City will lose in the end.
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It is blindingly obvious that RBS and Lloyds are proactively reducing liquidity and scrutinizing existing loan agreements in a blatant attempt to reprice loans, ultimately to the cost of the company and the economy, with higher unemployment resulting from further cost-cutting this behaviour drives.
The banks have reveted to type, as they did in 1990/1 and only the government and Bank of England stepping in again via London Rules or the like can stop this nonsense. They are unable to extract much more from their excessively geared mistakes, which are often loss-making and in distress, so are attacking mid-size companies which are profitable for now but having to make unbudgeted cuts to cope with the economic conditions and bank actions in repricing.
We have a choice, allow the banks to de-gear and increase profitability gradually and sensibly through a recovering economy or allow them to do so fast (with higher unemployment and a far longer recession in the process). A nil brainer I'd have thought, unless you run a bank that is!
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Robert, we own some of these major banks, let's do with them as we wish. State banks are what we have, lets use them to punch a hole in the traditional ways of doing business in the city. We have an opportunity to undermine the reckless gambling culture that was normalised within the leading banks. Let's do it, lets have a openly recognised state banking sector that invests in this country, provides affordable loans in this country and encourages 'real' wealth generation within the other sectors that actually make things and provide useful services.
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one of my banks has just sent me a statement showing they are paying me 1.75% on my balance.... at the same time offering me a loan at 10.5%..(they do not seem to see the irony of offering to lend me my own money!) i wish i could run my business on such 600% margins...
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Hmmm, in physics, energy can neither be created nor destroyed but simply converted to other forms of energy. The same can be said for money in so much as there is a finite ammount which can change from a deposit to a mortgage to a repayment with interest to fund deposits and the interest thereon plus profits for the banks to distribute to share holders, the sum total of all the parts effectively still equates to the initial available ammount of money redistributed. Foreign investment may increase the localised ammount of money available to the detriment of it's availability elsewhere hence some become richer as others become poorer. So in effect wealth generation does not exist globally until someone decides to add money into the system (maybe think of this as bringing some energy back from the moon and repackages it into some kind of earth style energy that others then want to get). The effect of doing this causes hyperinflation (countries like Zimbabwe) which is offset in the developed world by manipulating interest rates but the fact remains that you can't alter the worldwide ammount of money without creating an imbalance elsewhere. Any other view is simply unsustainable. What we have now is a situation where so much alien energy has been brought back to earth that we have become dependent on it for our existence in the short term and need to be either weened off it gradually or go cold turkey this is the political decision currently being debated between Labour and the Tories IMHO and will be the central argument over the coming months. In the meantime everyone is stocking up as best they can on the financial equivalent of tinned food in the hope that they will have enough to survive the inevitable famine to come.
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How come the government thinks that the banks it does not own and has not helped have a duty to do what they say. They are businesses and thus are doing what they think is best for their business under the current conditions. why should that change because our governmnet wants it to. Particularly so when the governmnet is taking no risk and should the governmnet demands result is lost profits or anything the banks would hav eno come back for compensation on the government.
If the government wants them to chnage what they are doing then they need to e.g. raise interest rates or something.
Of course, the banks the gvernment now own and have bailed-out maybe have a duty to do what their shareholder requires - but that is UKFI not Brown/Darling and his mates.
Labour's attitude seems very dictatorial these days - no "encourage" just dictating to everybody what they must now do. Kind of leaves a bad taste in the mouth but is very much the way Brown works.
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Does anyone have any idea where the Gov are going with all this, because I don't:
"To translate: there's less credit for business and it's more expensive."
Less and more expensive credit is a bit of a given after the trouble it's caused!
... and Brown and Mandy (the Blade by which Nu Labour will eventually commit Harakiri) are going to try to persuade banks to lend more...... stupidity beyond belief!
But hey Mandy was only brought back to save Brown and Labour by politiking - deepest financial hole since the world was at war and the most significant appointment is a Professional Smoozer - God help us!
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So the sheer awefulness of the situation is clearly emerging and if I understand RP's drift there would appear not much more can be done. To avoid the economy spiralling further perhaps instead of quantative easing try public works, up rated benefits, deferred NI and company taxes (effectively and interest free loan) to SME's. The economy is not going to revive by exports (£10 DVD players to China?)so home demand is the only feasible way and putting spending in the pockets of the masses balanced by higher taxes on the well off (>£50K)is the only tentative alternative to depression and cold turkey unto death. Some of us did not see the last 10 years as a golden decade.
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I am sure the Bank Executives must be quaking in their cash filled boots-in your dreams everyone.Why do the supposed 'Powers that Be'not understand that their pussyfoot reactions have no effect on the Bankers.The Bankers continue to line their pockets at the taxpayers expense whilst cruelly and uncaringly pursuing individuals and small firms to the extent of near bankruptcy also making 1000's of ordinary employees redundant.Shameful -they should all be dismissed immediately.
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"To state the obvious, there isn't a great sense of common cause or national purpose between the banks on the one hand and the government and Bank of England on the other on how to revive the economy."
And to state the even more (bloomin') obvious, there never will be as the globalised banks are only worried about their existence and prosperity and not the UK's ecomonic health.
There is a FUNDAMENTAL difference between the bank's vested interests and the UK economy's.
And that is why so many people have said nationalise the banks, or let them tumble, or split them up and nationalise the high street 'retail' banks leaving the 'casino' banks to run off on their own two feet to thrive or die without U.K. public money backing it.
But, of course, that idea was argued down by the "experts" in the financial industry and their great mates, the other "experts" in the regulators, and their other mates the politicians. Which happens to suit the bank industry fabulously because they are still being propped up by various mechanisms (some more so than others) but STILL don't really give a monkey's whatever about the UK economy or its economic recovery!!
It's a classis case of what Prince Philip described years ago as the "I'm alright Jack" attitude.
And in this meeting of the great and good on Monday morning, who REALLY holds the power?
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I think that the whole direction of both the banks and Robert Peston on the one hand and the Bank of England on the other have both missed the point. 70% of new jobs are created traditionally by small busineses, NOT Mid-sized nor Large companies and it is theese same Small companies that are under increased pressure from the lack of funding. They survive by making people redundant and that adds to the woes of the UK plc. The owners take out further advances, based on last years' income not this, on their own homes to fund their companies because the banks are not willing to lend. I for example had my £10k overdraft facility removed after two years of paying for the facilitiy but not needing it, and the month I do need it, it is taken away. I now have to beg borrow and steal 'as it were' from family and friends to fund the company until orders are completed or sack everyone and go under, still losing the house, and letting down customers who need the services we provide.
It is the banks who were greedy and lent to 'unproven third world clients' and bought 'over-rated' unworthy CDO's with OUR deposits that are to blame for this mess as well as their over marketing of debt to a needy consumer which they educated to live on debt.
We need our overdraft facility back.
I spent several weeks searching for other forms of credit, both business and personal, and this seems now to have proven to be counter-productive as my personal credit score dropped from 852 to 334 because I was deemed to 'be searching for large amounts of funding'. So Experian and Equifax are also part of this problem with their arbitrary 'Computer says no@ attitude.
Please bring back the Bank Manager who knows his customers and who has some actually power to lend.
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And what precisely can the court of kings do to 'force' things to change? Shouting and ranting and banging fists achieves nothing, except the next consumable sound bite in the media feeding frenzy.
Meanwhile, ranting aside, the liquidator and court sections dealing with company and personal bankruptcies etc must be doing a roaring trade! Care to divulge the business figures on that one, Robert?
Banks AND big businesses are holding on to their money, leaving the smaller fish in the sea without their cash flow. This has being going on for months, and yet only now the court of kings have realised?!
The more things change, the more they stay the same.
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A problem caused by too much borrowing and lending to be solved by more borrowing and lending. The boom was an illusion, time for reality. 1,2,3.....and you're awake.
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Put simply Robert, we have to live within our means. Therefore. UK and world trade will slow as the debt fat West goes on a slimming programme to reduce consumption. Growth will come from Asia as they aspire to become as debt fat as us!
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7. At 10:17am on 23 Jul 2009, stevewo wrote:
At the height of the "boom", "flare up", or "bubble", (whatever you want to call it), I was offered over 90,000 in credit card loans, a similar amount in personal loans and goodness knows what they would have advanced me in mortgage.
I could not have paid back ANY of this, but that did not seem to bother them.
Millions did take advantage of these offers, hence our current mess.
On a visit to a retail outlet centre yesterday, I noticed that the place was busy, with plenty of customers around, and they were buying.
But the prices were way down on last years or earlier.
Businesses are adapting, and one thing is key.....you can't sell anything if it's over-priced, and that applies to everything from houses to shirts.
Small businesses are the life-blood of the UK economy, and this trend may increase.
The City must not "sting" them too much, or the City will lose in the end.
----------------------------------------------------
You have hit the nail on the head. The banks are too big and in order to pay out the bloated salaries have to resort to pricing expensive loans via an enormous profit margin. The banks need to become smaller streamlined operations with lower margins and therefore lower prices on the loans they offer.
Small businesses as you say are adapting by lowering their prices to consumers. Banks must do the same. A new economy will develop mostly comprised of thousands of small to medium sized businesses along with a handful of household name blue chip companies. The days of the Square Mile earning Billions of pounds in annual profits are over. The banks must now realise that this is the price for their survival.
In the world of digital communications, do Head Offices need to be located in expensive property locations? Additionally the to the high interest rates being charged for loans, the conditions on the loan in the form of collateral deposits are severe. Usually this is the residential properties of the MD of the small firm if the loan defaults. At the moment taking out a loan in the current economic climate is a very risky proposal indeed.
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Make no mistake, SMEs are being totally stuffed by the banks. They have raised the cost of borrowing to a usurous level and increased their charges significantly. SMEs may be the seedcorn of our future prosperity and provide a huge number of jobs, but they are a time-consuming irritant to banks. 'Big bucks'don't come from lending to SMEs.
SMEs are having a really torrid time dealing with banks right now, but are afraid to publicise what is actually going on because of how their bank might react. Employers organisations have been singularly useless at highlighting their plight - probably because all their committees are peppered with bank representatives who would be quick to report any miscreant SME who dared to reveal their behaviour. Think this is paranoid? Go and ask the MD of an SME!
A sad irony that banks perceive SMEs to be a big risk (and charge accordingly) when banks have recently been(and perhaps still are) the biggest risk to all of us...and we supported them!
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The BoE's description of the marketplace certainly mirrors my own recent experience. I've asked my bank for explanations - they have asked for more time to reply. I shall keep at them.
Meanwhile, if anyone wants to know what the future holds for us, they might do worse than follow the debate about BORD SNIP in Ireland. This committee (of economists and accountants) produced a report recommending huge cuts in Government expenditure including closing schools and cutting hospital services, benefits etc. They are now being accused of being blinkered and promoting their own city interests and wealth at the expense of rural Ireland which was not, of course, represented on the Committee. The debate is just starting and regular commentaries are in (among other places) the Irish Times and Independent.
Frightening.
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I tried to buy my first flat this month.
The banks who are offering 0% on current accounts and less than 1% after tax on savings were quoting me 6% on a mortgage despite having a 30% deposit.
Needless to say I'm going to rent for another 6 months for prices to become more realistic, which means for another 6 months I wont be buying furniture, decorating items, white goods...
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It just goes to show, Robert, that this is a very big hole we are in and it is going to take an awful long time to get out of it - meaning that the forecasts of five years, or even ten, are probably about right.
Mervyn is quite right to be furious that his base rate reductions are not being passed on by banks but are simply helping banks to make more money with their existing rates. We are all furious about it (except for the bankers of course who reckon these extra profits are a result of their own talent, and therefore justify their continuing bonuses....... er, yes, Mr Hester).
But it does highlight the two undeniable points - the huge lack of competition between banks, and the extent to which we as a people handed over control of our monetary system (not just in the UK but certainly in the Western world) to the casino bankers who have royally ripped us off and landed us in a big one.
For the government to contemplate muddling through the next decade with largely the existing banking structures and regulations controlling our national monetary system (which represent the 'contract' between the working people on the one hand and the money-lenders whose product every single person is forced by the very same government to use, on the other) is simply not good enough.
We need far reaching, breathtaking, once in a century changes to this system, of a sort that have not appeared so far on Gordon Brown or Alistair Darling's radar screen at all, but are indeed showing up now on Meryvn King and Vince Cable's and to a much smaller extent on David Cameron and George Osborne's.
We need to get rid of the corrosive pathetic miserable idea that the only thing this country can be good at is money. We need to understand that the big bubble that was 'financial services' that grew up in the City of London over the past couple of decades or so, has actually, in part caused the relative decline in the UK's industrial and technology sectors (.... just think where all the talent went....).
And we need to have a bit more confidence in ourselves to believe that if we start controlling the money-lenders more (limiting their size, getting them to disclose more information, introducing downside risks in bonuses, separating off certain parts from other parts thereby making links between them transparent etc etc) that UK plc wont collapse and the world for us won't come to an end.
A belief in the fundamentals of the proper operation of markets - many players, highly informed buyers and sellers etc etc - would in fact suggest that such measures will in due course be seen to be to the advantage of our financial services industry, not it's detriment.
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The banks are behaving as private companies are supposed to do, maximising shareholder value. Of course they will take advantage of the current shortage of credit to charge high prices for it, and at the same time make sure the shortage continues by not lending too much. There will be an unspoken agreement between them to stay in line, because it is of such obvious mutual interest to do so.
The government is torn between its concern for the economy and the need to let the banks make some profit in order to repay taxpayers.
Why, oh why, were the banks not allowed to go to the wall? There would have been perhaps a week's chaos, while the administrators got the profitable retail side restarted, but all the stupid loans made by the investment sides would have been wiped off.
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Point 1
I'd like to point out that unless a so called 'financial expert' accurately predicted the credit crunch, then they cannot refer to themselves as an expert. There's too much bandying around the expert word in my opinion. Mr Expert if you didn't predict it, then I'd suggest a change of career because you're clearly not very good at this one.
Point 2
When bankers moan that with further regulation they'd leave the country, I'd like to know exactly where 'they'd' go? Europe? I don't think so tougher regulations than here, USA? again now tougher regulations than here, Australasia? I don't think so, they don't allow criminals in. I say lets call their bluff, I wish I had a pound (not that it's worth anything) for every time I've heard "If so and so happens then I'm leaving the country"...
Point 3
If bankers are so deluded to think that no one else could possibly do their job then I say good riddance. Bankers have become the biggest criminals in our lifetimes and how criminal procedings haven't been brought to bear upon them escapes me. The sum of all the suffering they have created (with help from our government) is incalculable, shattered dreams, broken homes. You will never be forgiven for this.
PS I'm not even going to start on the budget war in Afghanistan otherwise I may start smashing my keyboard on my desk.
I thankyou.
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Some shocking editing in there Robert,
Anyway, I would say that you are stating the obvious and therefore the actual act of "calling in" the bank chiefs is highly political and will have no profound significance. Unfortunately you stop short of actually calling the situation that, why is that?
You also fail to point to the regulator functions of the triumvirate that allowed this expansion of debt to flourish
I also believe that you are briefing that worse is still to come, the rollercoaster is about to head downwards again...with a certain inevitability.
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To rephrase what I wrote earlier.
A proposal for change:
Yes, and ..... all banks operating in the UK should be forced through NEWLY ISSUED banking licenses to plan and operate according to longterm business plans, should be forced to abandon their tax evasion schemes, should behave like good corporate citizens and, generally, serve the societies they operate in. Only under such conditions should they be given a new license to operate in the UK, given that they are essential public utilities and enjoy priviledged access to public funds.
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Aside from the inherent risk in lending in todays circumstsnces, the really big problem is that the infrastructure to "stuff" that risk is AWOL and no one has designed a replacement. Possibly the banks thought time would pass and normal service would be resumed but it won't be . there needs to be a root and branch redesign and we have to expect that borrowing and groweing enterprise is going to be a slower process asit used to always be.
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Relax everyone, the crash has simply revalued assets down to a level where we can afford to buy them its wealth redistribution of the highest order. The Share price in RBS and Lloyds is on its knees, people should be filling their boots buying them safe in the knowledge that the labour governemnt is going to tax the previous rich owners of such shares to fund the recovery in which mere mortal such as you and I can own large numbers of shares in the future.... Lovely!
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There's a very simple way the banks can get more deposit based funds to increase their lending-end the artificial and meaningless base rate 0.5% nonsense and get st deposit rates back up to where they belong (5-6% at least).
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Whilst the banks used dodgy practices to inflate their shareprice unfortunately business has also been doing this for sometime especially in the telecoms service sector, hyping shareholder value in exchange for bonuses giving them large shareholding not necessarily cover by true worth, therefore is it not obvious why the new chastened banks are not always keen to lend to equally risky over leveraged businesses. I worked for a company where one deal we did carried possible penalties more than three times the value of the contract (£250M) against much advice, lo and behold those penalties are now being claimed and contested. Gross mismanagement of business and undue risk taking goes a lot deeper than just the banking sector.
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Let's talk about Fractional-reserve banking.
How can this be a legitimate practice?
A bank has deposits of X.
Imagine the amount that a bank requires in reserve X/10.
The same bank can lend out (X-X/10) as magical mystery money that it has created out of thin air, while keeping hold of the original amount X.
This thus increases the money supply, is inherently inflationary and has the effect of devaluing the base currency.
What we require is a resource and technology based economy.
The whole central banking system is designed to make the general population debt slaves.
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I dont think it's only a question of how much is being lent but how much the banks are charging - even on Governements special schemes. We have been charged 10% 'arrangement' fee for agreeing to continue a fully secured business overdraft for a further 6 months. Seems like extortion to me and this from a bank which we all own 40% of - perhaps we should offer to only pay the 60% as we have already paid the rest.
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Lending targets by themselves are a bad idea. Just go back to the old fahsioned prudent lending, to small and, especially, big, borrowers.
I doubt the motivations of politicians forcing banks to lend.
If lending targets are genuinely the right thing to do, then it can be easily achieved by a direct linkage of bankers bonuses and salaries to lending levels.
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Gordon Brown, as Chancellor and Evil overlord, fueled the consumer credit driven economy that launched us into the current recession.
What happened to the rule where mortgages could only be taken out on 2 or 3 times of your base salary?
What happened to the stigma that was associated with debt?
Gordon Brown is the one who needs to be held to account.
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Odd that, Brown was only yesterday in his press conferance telling us how many families and small businesses that were being rescued by his goverments packages and policys.
It ran to hundreds of thousands......
Yet darling is calling the banks to order?
Reminds me of Ukrainian tractor statistics.....
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It may be me but........
I always thought that financiers infesting the City of London were paid their massive salaries because they knew what they were doing. They were the best that could be found amongst the population.
We know that politicians don't know what they are doing when it comes to the economy. They are only interested in conning the public to vote for them at the next election. So what do they know about the economy?
Then we have the Bank of England and its governor (my hero!).
So between the three organisations the only ones I have any faith in are the good people employed by the Bank of England.
Where is the debate?
Politicians......?
City of London financiers......?
Or the Bank of England?
I rest my case!
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Last time I looked Nationwde was
1. A Building society rather than a bank.
2. Being limited in its ability to lend by the unfair FSCS levy that has punished prudent lenders like itself while failing to encourage the wreckless lenders to take more care.
3. Benefitting from not getting into a mess in the first place through responsible lending.
This dying government is now trying to get them to ignore sensible lending to artificially boost the economy and save their own skins. i.e asking the banks to lend wrecklesly again - that's the only wayy to get back to 2008.
The governments support of the Nationalised banks has provided those banks with protection and a competitive asdvanatge that the prudent financial organisations are unable to compete with. Hence all the silly rates.
1
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if banks are having trouble making profits, do we have too many banks for these troubled times?
the BOE and Gov won't let any of them go under, partly because of the enormous loan books they carry, but it may be a way out, to consolidate and reduce the number of banks.
just as industry in the boom times, bought out and consolidated, now is the time to face the unpalatable truth -
a) we have one or two banks that are dangerously overstretched (too large to fail) and
b) we have too many banks taking too little of what profit there is to be had.
Consolidation and unfortunately more redundancies are inevitable.
Fewer banks will not instantly lead to lack of competition, but it may ultimately release much needed funding for the businesses that not only form the backbone of this country, but keeps the very banks themselves alive.
They need each other as their own life support systems, perhaps as appropriately parasitically dependent as the Clownfish and the Anenome!
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When I owned Lloyds shares last year GB destroyed the value of them. I have since dumped those shares (at a loss), but still hold HSBC and Barclays.
I want the Chief Execs of my banks to represent my interests as a shareholder above all else. The taxpayer does not have any interest in the activities of HSBC and Barclays, so if GB, Mandy, Darling et al want the non-taxpayer funded banks to do something that is not in their financial interests, the Chief Execs should, on behalf of the shareholders, tell them where to go. Period.
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33. At 12:47pm on 23 Jul 2009, notfooledsteve wrote:
"I worked for a company where one deal we did carried possible penalties more than three times the value of the contract (250M) against much advice, lo and behold those penalties are now being claimed and contested. Gross mismanagement of business and undue risk taking goes a lot deeper than just the banking sector."
Ah yes the classic loss leader strategy, generate a deal to get into a mraket sector int he hope of getting bigger better deals or additional revenues going forward. How many time has this linebeen used in meetings I have been in. Funny how liberal managers can be with other peoples money. It happened in the dot com bust at the beginning of the decade where every telecoms company was spending billions putting fibre in every orafice they could in the hope that they would be cheaper than the opposition and world dominance would follow. Unfortunately all that followed was a big bust where the incumbants, BT and Cable and Wireless bought the Energis' and Infonets of the world. Exodus internet was a classic example having "bought" digital island in the boom only to be rescued from bankrupcy within months by C&W and hence a state of the art infrastructure was built funded by debt which was written off by the bank while the assets were snapped up by the big boys.
The real problem is that no one listens to basic business wisdom anymore which is if you have a pound, the aim of the business is to add value and turn that pound into £1.20 instead they say if we spend a million pounds but make a loss we will be up and running and can make the profit back next year. Too many people have bought too many Porches using this logic, the real shame is that many of them have gotten away with it
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It is nice to know that the banks are refusing to help the taxpayer when the taxpayer stepped up to the plate when the banks needed help.
Well the answer to me is a whopping great tax on bank profits and executive bonuses and keep repeating it until they get the message.
We are all in the hot soup together and need to look out for each other. If the banks are going to get fussy about our common situation then the rest of us should stand on their head and force them to drink the soup into which they dunked us in the first place.
This is not the time to have meetings: this is the time to get rough and nasty.
Don't these people know there is a recession on?
Don't these people know there is also a war on for that matter?
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12. At 10:42am on 23 Jul 2009, DeimosL wrote:
"How come the government thinks that the banks it does not own and has not helped have a duty to do what they say."
I think you're missing the point here, whilst the Government bailed out a couple of specific banks - if they didn't then there would be no banks at all as that's what happens when there's a run on the bank.
Too many people think this was just a Northern Rock or HBOS problem - the reality is the entire industry was dead on it's feet. If NR / HBOS and RBS failed they would have brought down all the others too.
I'm looking at a credit fund at the moment, it contains various credit instruments written out by banks that are gone (Lehmans etc), banks that are nationalised (RBS etc) and banks who stil remain (HSBC). If the nationalised banks weren't there then this fund would be worthless.
....and it could be your pension, annuity or savings that would suffer.
So please stop making out it was a few bad apples in the barrel - it wasn't.
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17. At 11:04am on 23 Jul 2009, whizbang2005 wrote:
Whizzbang, maybe you could try ZOPA, an online deposit and lending exchange which may help and avoids using the banksters services. £10,000 is not a huge amount, and I am thinking of investing some savings in ZOPA so the return is better than the paltry offerings of the banks.
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Robert, dare i say this like many others have already.......Isn't it time for a non-banking story? Here's some ideas
How about Lord Davies' comments about the UK needing to "export" its way out of recession. Maybe you could talk about the UK manufacturing sector, the weak pound and its chances of doing this.
Maybe it is even time for a POSITIVE story. Say the two fellows at BrewDog the largest independent brewery in Scotland. Both in their mid-20s they've signed a massive deal to export to europe and have increased turnover by 200+ per cent recently
Typically the main articel and te blog that follows are depressing! I dont think it would hurt to turn away from banks to other industry or even to success stories
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Two reports from researchers came out yesterday.
One suggested that, by the end of 2010, Lloyds will need to write off $77bn (yes US$) of bad debts.
Another suggested that RBS and Lloyds together will need to write off over £80bn (yes, pounds) during the same period.
Is our esteemed Chancellor and previous disaster who held the post suggesting that banks lend as recklessly again in order to save their own political skins?
That upstanding man who keeps writing about 'Courage' needs to grow a backbone and see what he's done to the UK economy. Or what will be left of it.
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These foolish politicians got us here by allowing mad house price inflation and it's accompanying equity release to fuel gdp growth for the sake of re-election, and now they want it to carry on. It won't happen.
Depression here we come.
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20. At 11:25am on 23 Jul 2009, PrisonerNumber6 wrote:
"Put simply Robert, we have to live within our means."
Agreed - but how are we going to achieve that when the media ensures we are breeding consumer generation after consumer generation through advertising.
Have any off you got kids? Have you seen the 'I Want, I want, I NEED'?
The fact that parents are working longer and harder means a lot of them simply buy things for them in order to replace their absence. This fuels the consumer boom which the idiots in Government mistake for growth.
"What is to be done?"
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Bang on ! Personally have been through the mill of remortagage this motnh with Halifax who were helpful but punitive given BoE rates, and have also attempted to take a loan to renovate a property - could find one lender who had a huge risk premium and fee, everyone else has left the market !
The govt really have to swing the big stick here to get the economy going, and for many of us that means the housing market (all of it) needs freeing up.
Clearly the banks are making money again and bonuses are on the march, but no products available to poor old consumer.
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26. At 12:04pm on 23 Jul 2009, stanblogger wrote:
"Why, oh why, were the banks not allowed to go to the wall? There would have been perhaps a week's chaos, while the administrators got the profitable retail side restarted, but all the stupid loans made by the investment sides would have been wiped off. "
I think this demonstrates why people were so concerned about the size of corporations. The bigger they are - the harder they fall.
Whilst it might have been very exciting - letting the banks fail would have brought the whole system down.
Please note everyone, that not only are the Government following the pattern that created this mess by borrowing more - but crucially they have waived competition law toc create super banks (both here and in the states) - which is yet another sympton of the problems we had.
If Northern Rock was the small regional bank it started out as then it could have been allowed to fail - the same with HBOS and RBS. The problem is they weren't - in fact they have been allowed to grow and grow eliminating most other smaller competition on the way.
This not only applies to banks, but all the other industries who are currently almagamating into 'Super companies' - which will all be 'Too big to fail' in the future.
Sort that one out Gordon or Dave, or whichever mug gets in next.
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"Disintermediate" - wow, that's a new one on me! Still, it's a good explanation of things, Robert. I wonder how many people are doing as I am: repaying all debt ASAP and vowing never to borrow again from banks? Fortunately, my small business doesn't need external funding now but I feel very sorry for those that do - and also for those individuals who took personal risks with big mortgages, etc, as many of us did 10-15 yrs ago. If this mess had happened then I would definitely have been one of the casualties. There's far too much talk at the top (as always with politicians) whereas at the coal face the harsh realities are there for all to see and suffer. There are some easy things to do but politicians, regulators and bankers are all trying to save face rather than help everyone get through this crisis. Personal disasters for businesses, employees and homeowners really don't hit home to the decision-makers because they'll never face such traumas themselves. I guess we'll all cobble our way through until most of us rise to the surface somehow. Such a waste of people's lives and the country's immediate future.
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#47. MrManj wrote:
"Maybe it is even time for a POSITIVE story... I dont think it would hurt to turn away from banks to other industry or even to success stories."
Unfortunately, the nature of this blog is such that if Mr Peston were to write such a positive story (or even one that was not entirely doom and gloom) he would be accused of being a New Labour apologist by the hardcore of regular contributors.
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37. At 12:55pm on 23 Jul 2009, Invader-Zim wrote:
Gordon Brown, as Chancellor and Evil overlord, fueled the consumer credit driven economy that launched us into the current recession.
What happened to the rule where mortgages could only be taken out on 2 or 3 times of your base salary?
Invader,
You will have to go back much further than Gordon to answer those questions. It's very easy to blame the one who held the parcel when the music stops, but this same ethos has been driven by every Government in my lifetime - no matter if they were red or blue.
It's far to simplistic to chuck the man out and think everything will be OK as a result.
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#48. Bluematter wrote:
"Two reports from researchers came out yesterday.
One suggested that, by the end of 2010, Lloyds will need to write off $77bn (yes US$) of bad debts.
Another suggested that RBS and Lloyds together will need to write off over ?80bn (yes, pounds) during the same period."
Those reports came directly from the Treasury, not from anonymous "researchers". And they were the topic of Mr Peston's blog yesterday.
Do try to keep up.
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31. At 12:37pm on 23 Jul 2009, icantmakeupnames wrote:
"Relax everyone, the crash has simply revalued assets down to a level where we can afford to buy them its wealth redistribution of the highest order. The Share price in RBS and Lloyds is on its knees, people should be filling their boots buying them safe in the knowledge that the labour governemnt is going to tax the previous rich owners of such shares to fund the recovery in which mere mortal such as you and I can own large numbers of shares in the future.... Lovely!"
....if only that were the case, unfortunately over the last 20 years the Government has been incentivising people to move from the state pension system into the private pension system (myself included) by contracting out of serps as well as giving tax breaks on stocks and shares ISA's - which all contributed to the boom in shares.
That means it's not just the rich who will suffer but millions of innocent pensioners and savers who did nothing wrong except trust their Government.
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39. At 1:04pm on 23 Jul 2009, EuroSider wrote:
"I always thought that financiers infesting the City of London were paid their massive salaries because they knew what they were doing. They were the best that could be found amongst the population."
EuroSider - I have just been rushed to hospital as my sides have split with laughter after reading this.
....it's the same principle that the media use to say outrageous nonsense like 'Jordan is a clever businesswoman'.
The lies infest every area of our lives and in these times the truth is the only thing which has value due to it's scarcity.
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43. icantmakeupnames
Between you and notfooledsteve you have summed up the achillies heel of competition based markets.
Now hopefully the rest of the world will see sense and ditch this ill-fated system.
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Most of last autumn, there were articles referring to the amount of corporate debt coming due right now. In the meantime, our esteemed leaders set up the 'asset protection scheme'. So its hardly news that the government wants the banks to lend...
For example....
If RBS didn't renew its part of the loan to the owners of Liverpool Football Club, do you think it would have been repaid? (collaterol for debt being US sporting assets which are likely to be debt financed)
If it wasn't repaid, who would have covered the bad debt?
Yes that's right, the taxpayer through the asset protection scheme.
If anyone still thinks that mortgage debt is the UK problem just use a calculator to see how many mortgages of 200,000 would have to fail to have the same impact as the failure of one £350,000,000 deal. Then say how many 350,000,000 bad deals make 77bn. Then ask how many 10bn bank purchase deals of parts of ABN AMBRO make up 77bn and ask where the money came from.....
The sums (I cannot call it maths) are easy.
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Agree with post #27.
The rates of interest are extortionate but the charges are the real scandal. A relative sought to start a small business hoping to turnover £80000 this year in an essential craft. Two banks quoted £1000 as fees to open and demanded his home as guarantee even though he was proposing to avoid drawing down an overdraft (needed because his clientele might be slow to pay). He had to have a bank account in order to bank cheques from one public body client. Small wonder he is executing only cash business while negotiating emigration to a receptive Commonwealth country.
Small acorns, etc grow to mighty oaks. Apparently not in UK2009. Two more generations lost to us.
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"I don't believe it!" The banks are not lending. Having perhaps spent the last few years with a fairly cavalier attitude to lending, they are now unanimously uber-cautious. Robert's article is interesting reading, but has he tried speaking to a mortgage broker of late. There are headline great fixed rate deals about, but only if you have a 60% LTV or better and you line their pocket with a whopping £1,500+ arrangement fee. No wonder Mervyn King is tearing his hair out, when the base rate is at 0.5% and LIBOR is at just under 1%, to the masses with LTV's of 80% or more finance is costing 5% plus, not too mention the the arrangement fee. Having personally entered into a house purchase and renovation project in November 08, I am now hearing a completely different story from my 48% publicly owned bank begining with L. I only want to flirt with the 90% boundaries until work is finished when I will be back down to 60-70%, Experian tell me I am "Excellent 97/100, can I get a mortgage or mortgage advance? No! The brokers tell me it has become worse of late, rates are going up and applicants are being refused for the most spurious of reasons. I really hope we do not have short-term memories as I will be interested to see the banks results next year, I suspect they will not be half bad (apart from the mountain of debt they all have parked in administration that has not been crystallised as yet) as they claw back the debts from existing customers.
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There is a lot of bleating on this blog but not a lot of solutions. Anyone?
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This posturing by Mandleson will produce nothing. This governmentis desperate for some good news and will do anything to get it.
Teh public is not stupid, far from it, the know banks will never helpand can see how they have been hoarding taxpayers funding to make their solvency ratios look good.
Teh only ones who cant see the wodd from the trees is the government and have not cottoned on that the banks did ot give them the full story of how big a mess they were in.
All thsi is now why the UK is the Mickey Mouse player on the world stage. Labour will never be forgiven for that huumiliation.
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"54. rbs_temp wrote:
Unfortunately, the nature of this blog is such that if Mr Peston were to write such a positive story (or even one that was not entirely doom and gloom) he would be accused of being a New Labour apologist by the hardcore of regular contributors."
To be honest given the number of comments i've seen made along those lines i think he would get crucified regardless! He he says things aren't as bad then he'll get accused of talking things up. When he says things are bad many of the same people will say "yes but how bad are they really!?". So i don't think he can win on that point
What i will say is that Phil McNulty, having written a piece for others to blog on, will later also get involved and post on his blog in response to others who ask further questions (obviously he doesn't respond to every question asked). To my knowledge i haven't seen Robert do this at all - please correct me if he does and i've missed it.
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Oh and of course I forgot to say that the 10bn was for the wholesale lending and investment bamnking bit of ABN AMBRO and that the regulator responsible for wholesale lending is now in charge of the FSA
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62. dhmeldrew
We're in the same boat as you - my partner wants to expand her business but we're not prepared to pay the extortionate rates the banks are offering.
We've gone from a situation where BTL mortgage companies were falling over themselves to lend money - to most of them not offering any products at all.
My brother works in a building society and they no longer sell mortgages - they merely offer a broker service.
Best thing is to sit tight, the rates are going to start rising again and you don't want to be caught out by extending your debt.
There's a FTB on this blog further up who is typical of the situation, before they couldn't get the money together because of the rising house prices, now they can't get it together because of the rates, fees and deposit requirements.
The banks are slitting their own throats and they are taking us down with them.
I suspect they can't actually offer any lower rates because they have bigger holes to fill than they are letting on.
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So Robert,
to summarise your article,
Excessive lendiing by banks leading up to 2007 caused the credit crunch.
Good Old Gordon (He put an end to Boom and Bust, Fiscal Prudence, Golden rule, Blah, Blah, Blah Blah) tells us all the fault lies with the banks for this lending, and they should rebuild their balance sheets through increased Tier 1 Capital Ratios.
Businesses are struggling to obtain credit because banks overall are not lending as much as pre 2007. This is because a large portion of the pre 2007 market was provided by overseas banks who have now withdrawn from the UK lending Market. The rest are rebuilding their balance sheets as Gordon told them to.
Still with me?
So now we have a gaping hole in the credit needed by UK businesses, which will help all of us out of the recession.
Who does Good Old Gordon blame? That's right, he blames the banks that are left that he told had to hold higher capital ratios, which at the same time restricts their ability to increase lending.
So my conclusion is:
We have Good Old Gordon spinning arround like a Whirling Dervish, telling banks to do one thing and when he has spun around again telling them to do the opposite.
On top of that we have you doing Gordon's bidding for him. Do you and Gordon really beleive all this rubbish, What happened to the Iron Chancellor? Are you honestly proud of the quality of the articles you now write after a long career in journalism.
Please we are not all fools, how about some honesty?
I am not defending Banks or Bankers, but Gordon Brown can't take the glory like he led us to believe, when in fact he rode a Global Boom, and now that the proverbial has it the fan deny that any of the blame lies with the UK Govt, Treasury and Regulators. All led by himself.
The man is seriously delusional.
Roll on May 2010
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So the banks are saying they are doing their bit, i know of a lot of SME's who would beg to differ. Advertising a pretence to be lending is not enough.
I also have little time for banks who receive taxpayers money, or keep the option of tax payers support in their back pocket, effectively saying their only obligation should be to their shareholders and moaning that positive intervention by government owned banks would distort the market.
Will the bankers be able to keep a straight face pretenting to be concerned with what Darling / Mandelson and co have to say? somewhow I doubt it
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63. At 2:46pm on 23 Jul 2009, truths33k3r wrote:
There is a lot of bleating on this blog but not a lot of solutions. Anyone?
Unfortunately there may be lots of solutions but no-one on this blog is a member of the Government and therefore it will be a waste of time suggesting them.
I would start by emptying whitehall and the HoP and housing all the homeless which we wil start seeing on our streets in large numbers soon. The civil servants and MP's can work in tents out front where we can see them and see what they are up to.
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55. At 2:22pm on 23 Jul 2009, writingsonthewall
The Brown Man is the one who has presided over the collapse of society as we know it.
Responsibility is my word of the day.
Gorgo revels in his power, let him now take the responsibility.
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64. At 2:47pm on 23 Jul 2009, proman53 wrote:
"This posturing by Mandleson will produce nothing. This governmentis desperate for some good news and will do anything to get it.
Teh public is not stupid, far from it, the know banks will never helpand can see how they have been hoarding taxpayers funding to make their solvency ratios look good."
1 - You are the first person I have seen who has spotted this, both here and in the states banks are recording profits which bouy the markets - sadly these profits are FAKE and once the markets cotton on they will crash.
2 - The image of 'Mandelson posturing' is one that I cannot get out of my head now. It sickens me as I can only picture him posturing in a Borat style leotard and with his dodgy tash from the 80's.
Please do NOT refer to this again or I will ask the moderators to step in.
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Is it better to be Pestoff than Peston?
That is the question.
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Hello Mr. Peston, and kudos again for your insights.
I believe I read your thoughts here some time ago, to the effect of 'banking used to be done face-to-face.'
Small banks, bank officers who are long resident in the community--a situation where everyone has personal, relational, social 'skin in the game'. If a venture succeeds, everyone thrives and grins. If things go pear-shaped, everyone has to live with the discomfort of encountering everyone else in the grocery, on the football pitch, at church, at the school event.
Big banks are out of touch with the businesses and communities they serve, and upon whom they depend for their survival. No one seems to be addressing this simple problem.
The insane practice of propping up banks with taxpayer cash only compounds the problem. After all, if HMG or Uncle Sam have just dropped X billions into your business, who are the execs going to listen to? The local manufacturer of storm doors who needs credit to expand operations, or some nerd with a finance degree at Treasury? Or, more ominously, the local politician of the dominant paty?
In the meantime, at my small bank, the employees are looking for things to do, because they certainly aren't loaning money. The customers aren't coming in to apply, as they have become at least as risk-adverse as the banks!
Who would wager some portion of future revenues on a loan, given the events of the last twelve months?
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Just transcribed the voice from the bug at the real meeting in the toilets....
Mandelson: Re-inflate the balloon.
Bankers: But, its busted, and that is how we got here.
Mandelson: Just do it!
[pause]
Bankers: Why not invest in building assets the Nation needs?
Mandelson: Who cares about the Nation - I just want to be re-elected.(having not yet grasped that he wasn't elected!)
(By the way nobody got a word in, apart from Mandelson!)
The meeting is a far more of joke than the imagined transcript above. The participants are mainly those who caused the problem and whose whole education prevents them from understanding what they did or what they omitted to do. They don't have a clue. There is no plan!
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This comment was removed because the moderators found it broke the House Rules.
So, we have paid for the banker's excesses and now will suffer for several years, real pain for people who lose their jobs or homes. However, the banker's first priority is to return to previous levels of profitability and presumably reward. The real answer is to force them to operate at very low profitability to repay debt as soon as possible and reduce bonuses to zero while doing it. In this way it's the criminals who are punished, not the victims.
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#63. truths33k3r wrote:
"There is a lot of bleating on this blog but not a lot of solutions. Anyone?"
I am no expert in banking licences, but why not attach stringent conditions to banking licences in the UK and make them renewable every few years. Obviously it is not easy to shut down a major bank, but massive penalties could be imposed during a probationery period once a bank did not follow the terms of the renewable banking licence.
All banks operating in the UK should be firmly under the law of the land, enforced by renewable banking licences, and banks should not be allowed to play hide and seek with the national law and tax system.
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Robert,
You are correct I have just needed to raise £2m for a major piece of plant which will create 60 new jobs in manufacturing mainly for export.
I have a good credit rating and as the loan would be secured against a fixed (very saleable) asset you would have thought that this was just the kind of lending that they are being bankrolled to do.
I prepared a full kit enclosing management accounts, f/casts debtors creditors etc etc etc so that the information was there for any possible enquiry.
However whilst all of the government funded banks were gushing in their enthusiasm to lend the money, all of them have found a myriad of ways to stall and defer making a decision. The routine goes like this, the ask for clarification on a minor point we reply and then 7 days later they ask nother 5 questions, we reply and then 7 days later they ask another 10 questions.
I have been told unofficialy that the UK banks are not open for business but the asset based lending team have been told to go through the motions.
I have raised my funds now through a foreign bank, I am still waiting for an answer from the British banks.
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75. At 3:25pm on 23 Jul 2009, John_from_Hendon
Is there a reason that Little Lord Mandle-Foy met the Bankers in the toilet.
Did he leave the meeting looking flushed?
Is there a suggestion of insider dealing in your post?
Are you suggesting that this type of back door shenanigans are the stock and trade of the individuals involved?
Who was inflating the balloon?
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Why is ir that you and just about everyone else now knows the harsh reality that the country was and still is horrendously overborrowed.
The government continue with all sorts of stalling tactics pushing the problem further and further into the future. This is grossly unfair on those who will eventually have to pick up the bill.
Political it is but sensible it most certainly is not.
Why is it right that those responsible for overborrowing in the first place should not feel any pain and those who will be struggling to pay their debt off in the future will have to take the hit.
Homeowners still sitting on masses of equity and benefitting from ridiculous low interest rates while those trying to buy their first home cannot get a mortgage even if they can afford these well overpriced properties.
We can backtrack easily to the beginning of the credit crunch and see where the policies have gone wrong. Had the right decisions been taken then we would not be looking forward to such a long dismal future.
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'... all they're doing now is trying to put a proper price on risk...'
Pull the other one. WE are carrying the risk!, they aren't putting a price on anything but their own pensions and bonuses.
Solutions?
Break up these banks. Split each of RBS & Lloyds into 4. Tell Barclays if they want to continue to operate in this country, they can split their High St. operations as well.
Make them compete against each other properly; you'll soon find no more 1,500GBP arrangement fees for some off-the-peg mortgage deal.
Demand a proportionate relationship between LIBOR and base rate, otherwise windfall taxes come back in.
Demand unilateral mortgage acceptance for anyone in 'secure' employment at 3 times salary plus 1 times partner salary if they can come up with 10 per cent deposit. (The Govt. has a protection scheme in place already, yet they are skimming all sorts of charges and fees on top.
And for business lending, an ombudsman to review bank refusals or exorbitant charges on loan offers to review banks (and applicant's) conduct in contested cases.
Question-
Why are these larger companies going the bond route?
It can't be cheaper than the mainstream banks. Is it not the case that the investment banks are creaming off huge profits on these deals, and the corporations are in deep doo-doo and desperate to sign up to any deal that puts off the funding crisis for at least one more year?
Regards,
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71. Invader-Zim
In your earlier post you rightly referred to the "What happened to the stigma that was associated with debt?"
This was something Thatcher did in the 80's - so it's a bit rich laying it all on Gordon.
The bottom line is every Government and Prime minister has been guilty of creating this mess for the past 30 years.
You can change Gordon in May but I can GUARANTEE that if one of the 3 main parties get in it will be the same old story....
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I read somewhere this morning, what this country needs is a new Marshall Plan, not a banking bail-out.
(look it up)
The re-construction of this country to compete in the modern world is in ideas, technology, highly skilled manufacturing, and to some extent automated processes. Not in banking, not in the public sector, and not in government.
All central government should ever do is create deterrents against criminals, set taxation, monitor inflation, and check the armed forces are adequately in readiness. A wee bit of strategic thinking every now and then unfortunately (cos they are useless at it) -for transport and energy and some healthcare 'big-picture' issues
Everything else should be devolved to a local level, where decisions can be made accountable. Each county should be trying to compete against their neighbour to improve services.
Pour the billions into the private sector.
I work 80 hours a week, irrespective of what I pay myself.
I would treble my number of employees within 3 months if I thought we weren't going to be bug****d every time there was a recession, when our client go bust and we are left holding the baby each time.
It took us at 5 years on average to recover following the 1990 collapse and each one after that. We were paying 27% interest at one point (exceeded authorised overdraft), and 15% some of time I recall.
We point-blank refused to grow after the last one.
Regards,
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70 John_from_Hendon
There is no plan!
Let me elaborate
There is no plan
There never was a plan
There never will be a plan
There will only be elections where people propose plans that never get implemented.
The country will be going down the 'plan'
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#82. allmyfault wrote:
"Demand unilateral mortgage acceptance for anyone in 'secure' employment at 3 times salary plus 1 times partner salary if they can come up with 10 per cent deposit."
That's completely unrealistic. You would also have to take into account the applicants' ages, other debts and savings, dependents, the relative level of "security" of their jobs, the value of the home their buying compared to the price they're paying for it and a dozen other factors.
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80. Invader-Zim
Please, please, please will you stop talking about Mandlesson 'blowing things' in the toilet - it makes me heave.
Maybe he was looking in the bowl for the next plan....
What's his title again? Business secretary - does this mean he wears heels and stockings?
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The banks would find it easier to make 'sustainable levels of profit' if they did not pay bankers so much i.e. between 50% and 75% of revenue going on pay. Cut that to 25% and problem solved.
How to achieve that? First nobody should get bonuses until the bank is out of the woods. Second share infrasturcture with competitors. This is what the 3G cellphone companies did - shared infrastructure operated by third parties in some cases rather than every network building out its own set of base stations. For example, the computing infrastructure to operate bank accounts could be operated by a third party service company and shared between multiple banks - this also has the advantage that the computer systems are isolated from the financial failure of banks. Similarly, just like at airports one service company can provide check in for multiple airlines in many areas of the country a service company could provide basic branch services for multiple banks.
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84 Allmyfault
'I read somewhere this morning what this country needs is a New Marshall Plan not a banking bailout'
It certainly does and many ideas like yours should be thrown into the pot because the present lot in power don't have any.
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63. truths33k3r
...actually I've changed my mind - I do have the perfect solution.
We all know that just about every asset is overvalued. We have built too much and too many goods. The result is either a steady 'devaluation period' (deflationary) - a collapse, producing a similar effect (but faster) - or to create another boom to make it 'seem alright again'.
How about this - why doesn't Gordie announce a holiday for the country. That's right, a shutdown of the whole shop. This way we can go through the deflation and all get a sun tan.
When we get back down to 'true value' then we can all go back to work.
It will work nicely, we can all go out and help out on public works projects if we're bored at home and I can almost guarantee the country would vote for it in huge numbers.
The MP's seem to have afforded themselves a 12 week break - so maybe the rest of the country needs one too - we have all been working hard for the last 10 years - don't we deserve it?
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We interrupt this programme...
Since we are yet again talking about banking (yawn,yawn) has anybody noticed that all the bad news of the last few days (from unemployment to national debt to Treasury accounts not being signed off etc) has been buried under the 'swine flu' hysteria?
There's a link here I believe. The Government (note not the NHS) have today issued a statement (amongst others) that 100,000 cases of swine flu have been reported this week and of course have been taking the plaudits for setting up a natioanl call centre to get 17,500 people off the unemployment register.
THERE'S ONLY ONE PROBLEM. We have absolutely no idea how many swine flu cases there actually are becasue we are not confirming them by lab testing. And of course sick people will now convince themselves (via online checklists) that they have swine flu whether they have a cold/ food poisoning et al. Compare with the US who do for example.
US = 40,000 cases so far confirmed since April 15 (http://www.cdc.gov/h1n1flu/update.htm), 260+ deaths (but not necessarily caused by swine flu) from a population of 300 million.
UK = 100,000 in a week, 840 hospitalised 63 critical. Population 60 million, 26 deaths but not necessarily from swine flu.
Are we serious?
Somebody is playing a game here and costing a lot of time and resources......never mind unnecessary panic....sign of the times I guess...
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86. At 4:46pm on 23 Jul 2009, rbs_temp wrote:
"That's completely unrealistic. You would also have to take into account the applicants' ages, other debts and savings, dependents, the relative level of "security" of their jobs, the value of the home their buying compared to the price they're paying for it and a dozen other factors."
.....only if you were bothering to assess the risk - and it's not been done for the last 10 years so why bother starting now????
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Robert
Your quote:
'The other absolutely vital point is that in 2007, well over half the growth in lending came from foreign-owned and specialist lenders - which have disappeared from the market completely. So companies are now wholly reliant on the old-established British banks, which are - or so the Bank of England reports - lending considerably less.'
>>>>>
For what its worth, I think this is probably your 'best pick' since last December/January and I see that quite painfully you appear to be coming round piece by peice to my way of thinking on my 'favourite subjects' and be also getting ready to point the finger...
1) The present labour government have, since 1997, abdicated their responsibility regarding the management of the UK economy and banking/finance sector and the question (with the benfit of some considerable hindsight) was not 'if' the UK economy would derail but 'when'.
2) Globalisation and internationalisation of the former UK national economy (as we do not now have a real UK national economy as we're just part of a globalised corrupt mess run by a 100 or so financial centres, government and private banks, tax havens and billionaires, spivs speculators and free-loaders)... has gone way too far and regulation of the finances of the current UK virtual national economy will now be immensely difficult due to this international tangled web of finance/ banking structures and bad loans.
3) 'Our' (government/private) UK investment somehow needs to restablish a clean UK banking and finance structure and be be aggressively innovative and protectionist and invest in wholly UK investment projects (buying expensive jobs of Nissan is not the answer). We need to give money to new UK start up companies and not keep giving taxpayer money to bail out banks which send a good part of this money overseas into the 'global mess.'
4) Goondog Trillionaire Brown and his 'goon-show' is the problem! They have abdicated their responsibility of the UK economy (content to leave too much power with the EEC/EU) and are frightened to pick up the reins and manage the economy and empower UK business and create new enterprise zones etc with grants and prevent development except in the high employment areas - frightened to make tough choices - put money back into shipbuilding, green cars etc - Don't wait for Nissan and Toyota - we need to do it ourselves!
5) The UK can only truly come out of overall recession itself early if we re-trench, protect, invest, re-structure our economy to buy British, block imports of foreign cars and goods, ration fuel - get tough! Otherwise, we will wait several years to find ourself many, many places down the global pecking order.
6) We know that probably there is no British political party with the guts, know-how and mandate to do this (particularly the unmentionables)... but this is what is needed. The English PAYE taxpayer can't keep subsiding Wales, Scotland, NI, the Taliban, Robert Mugawbe's Henchman, £1 billion to India etc etc plus the lost Margaret Thatcher EEC rebate in Britain's favour.
7) We must remember that when everyone rambles on about Quantitative Easing ...will it/won't it work etc., that this is all being done on borrowed money which we have to pay back. The foreign spivs may have disappeared but they will be back for repayment of the money used for QE - with special additional interest payments now attaching.
8) Where are the radical political ideas to get us out of this national economic mess? That's why when I was writing in December 2008 and comments were flying in saying how cynical I was being - Robert, you have now got to £1.28 TR level in debt and so I'm being lenient on the devious lying megla-maniac we have for a Prime Minister by 'gooning him' with Goondog Trillionaire Brown?
9) We need a national political/economic leader with the guts, ability and vision of Margaret Thatcher to get us back on our feet - and I do not see one anywhere at the moment.
10) Freeport UK - Come and fleece us spivs, speculators and non-doms and get a passport or a knighthood has not worked and we need to get back to real basics - UK money for UK manufacuring for the UK economy producing UK jobs for British workers - The Prime Minister has said this but does not understand what is involved - because its easier to hide behind foreign 'over-printed currency' and global banking corrupt money and multiple 'GDP over-counting' than get his hands dirty with real UK investment.
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At 2:46pm on 23 Jul 2009, truths33k3r wrote:
"There is a lot of bleating on this blog but not a lot of solutions. Anyone?"
How about:
1) Set "targets" on consumption reduction rather than economic growth (which is actually energy consumption & pollution increase)
2) Work towards consumption equality by targeting highest offenders first
3) Heavily regulate usury (e.g. limit maximum interest rates and the ability of banks to create money out of thin air)
4) Gradually reign in the shadow banking system, as making money from money is not REAL wealth generating activity (e.g. introduce notional tax on derivatives and slowly increase % y.o.y.)
5) Create an aspirational measure of socio-economic maturity based not on GDP per capita, but some other Index (one that accounts for activities more worthwhile than capricious consumption)
6) Spell out to people that our voracious appetite for material goods and cheap travel around the world has turned us into nothing more than mere consumnivores: a most pernicious offspring of homo sapiens that is unwittingly victim, perpetrator and bystander all at once
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Alistair Darling, Peter Mandelson, Shriti Vadera and Paul Myners. What a pathetic line-up. Who can take these numpties seriously. They think they are in control. It's delusion, they have no control whatsoever.
So what non-existent money will be lent to whom, who can't afford to borrow anyway?
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If you think the mainland banks are not lending you should try the NI ones - loans from them are like hens' teeth
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Rugbyprof.
Oh it's better than that - in true 'spin maniac' style this Government is now applying the same techniques of handling the Banking crisis to the swine flu outbreak.
"The death toll stands at 26 - the same as last week - but the Department of Health has reclassified the way it counts mortality."
Reclassified the way it counts mortality? So when you think you're dead, the Government comes along and tell you different!!
Regardless of this, even if there was a serious concern would you trust this Government to tell you? Did they tell us the REAL reason for going to war? or the REAL cause of the banking crash?
(Taken from the BBC website so it must be true)
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The main problem may well not be with these banks but with financial nationalism.
Bnaks under pressure to lend in the country that bailed them out still need to curtail lending so they simply close down lending elsewhere.
Take one example- Brtain and Ireland.
UK banks increase lending marginally but Bank of Ireland closes its book completely.
Meanwhile, in Ireland, AIB and Bank of Ireland increase marginally while Halifax and Ulster Bank (RBS) virtually close their books.
Result - both countries lose and competition delcines.
This is just a microcosm of what is happening.
Coupled with fact that demand for loans is probably well down, I am not sure that the problem with lending in the UK is as simple as blaming the UK banks.
Lack of inter-governmental co-ordination to me is a much greater problem.
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We are dealing with the devine right of bankers to be very very rich. If not true they require that you have God tell them so, otherwise it is nobody's business how much they squeeze from the public, how many scams they run and how much bad paper they push off to the taxpayers. Seems like a good business plan, give all your bad loans to the government to pay off with taxpayer funds and keep all the good loans to make money. I wonder if they can tell that everyone can see the gaping holes in their souls. We can all hope that H1N1 has an affinity for bankers, nature does seek balance.
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Yes Writingsonthewall you spotted the 'dead parrot sketch' re mortality as well - LOL.
And yes you right about not trusting the Government of truthfully informing us (a bit 1984 eh?)
My real concern is the NHS is going to end up being 'politiced' in this. I know what they're trying to do with mortality classification but I'm mystified why they are not carrying out more diligence since this is literally costing 'an arm and a leg' (pun intended) to fund without any real evidence its needed..... because if it turns out to be a case of 'cry wolf' guess who is going to get pilloried? Not the Government.....
Given the state of the nation's finances I can only think that there's a very dark prince behind all of it...
By the way my comment earlier re yet another banking story (yawn yawn)today was not meant to be disrespectful to contributors but I can't really add any more to the debate since we seem to constantly go round on this one in RP's washing machine.....
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My bank withdrew a modest level of funding support from our company (we were looking for just 30%) or loan to build cost (we were looking for 50%). 'We are just not lending to this market sector at present'. The effect, the team of 8 who have been with me for 10 years or more have just lost their jobs and the business is now mothballed until further notice. But we hear the 'bonuses' are on the way back. Try explaining this to my team and their families.
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roger7444
My heartfelt commiserations. Ample evidence that there is a false world espoused and a real world to deal with......
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Alistair Darling, Peter Mandelson, Shriti Vadera and Paul Myners the four wise men of british finance, i personaly wouldnt trust them with anything higher than a five pound note but our beloved leader seems to have placed our interests in their hands.
what can these four do to overseas owned banks?
not a sausage in reality they can talk until they are blue in the face but its up to these banks if they decide to listen.
this is basicly a publicity stunt designed to make the voters think the government are doing a good job and to re-elect them.
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#42 opinionsofmine
So you expect the maximum (financial) return on your shares, no matter how detrimental this may be to others or to society as a whole, right?
Not picking on you per-se, just the stance you so vividly represent.
How do you defend it?
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State of UK's Health & Wealth
Septic shock is a serious medical condition caused by decreased tissue perfusion and oxygen delivery as a result of infection and sepsis.
Causes
The process of infection by bacteria or fungi can result in systemic signs and symptoms that are variously described. Approximately 70% of septic shock cases are due to gram-negative bacilli that produce endotoxins.
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98. At 5:29pm on 23 Jul 2009, bgolden wrote:
The main problem may well not be with these banks but with financial nationalism.
>>>>>>
These are all privately managed banks free to make their own decisions but there is no real financial nationalism either in UK or Ireland.
UK and Ireland gave up their economic sovereignty to join the EU/EEC and Ireland, particularly, has had mega billions of aid from the EU as a net receiver of EU money and the UK is a net contributor to the UK and both countries have 'lost/ surrendered their financial nationalism because they thought at the time that they would be better of doing so.
Now they're both subject to the global economic mess and do not hold the reins on their national economies, as EU members and both have lacked financial restraint in recent years with their domestic spending.
That is why each county needs a national government holding the reins that is accountable to its electorate - its called taxation WITH representation - the converse of what caused the American War of Independence.
Your comments are sound, I think, but there are many reasons for this continuing banking fiasco.
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#85. writingsonthewall wrote:
"The country will be going down the 'plan'."
However, I remain an optimist. I am an optimist because I do not see national oblivion as a preferred or likely option. I know there must be change and radical change (and not just changing from one conservative party to another one - that the media will present to us as change.)
How revolutionary the change will turn out to be is unknowable, but the human spirit will ensure that people will survive, whether the organisation of the state survives in tact rather depends on how resistant to change it turns out to be.
These blogs may be looked back upon as a small part of the change - 'a straw in the wind of change'! But I cannot be a pessimist and I do not recommend the state of mind (even if your are Gordon Brown!) So please, let us have not 'the country is going down the plan', but 'the good and the great' are going down the plan (if they do not choose to swim to the surface!)
So cheer up!
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how about we do a Chrysler on the banks, keep all the nice bits , make a new company and put the rest into administration , that way all the toxic stuff magically disappears
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#90 writingsonthewall
Interesting post. Whilst we have had our disagreements in the past, I agree with you that assets are overvalued and that devaluation has to happen. These overvalued assets are clogging up the banks' balance sheets and preventing recovery.
Would not letting the banks go into an American sytle bankruptcy, writing off of these bad debts, and introducing a new system be a better alternative to limping along with zomie banks like Japan has for the last 15 or so years?
Could it be that the "too big to fail" was a con from the banking system too arrogant to admit their own errors and expecting someone else to cover their losses?
Is it better for us all to take the pain now like adults, rather like ripping a plaster off quickly?
Yes there would be a number of insolvencies from companies and individuals who are overleveraged, but would it not be better for the stronger businesses that remain, and for our economy to produce at lower costs and be more competitive? Nobody imports more expensice goods of the same quality than they can produce themselves.
We all know people that are suffering at the moment and it is our place to help them. I know that you are skeptical of markets but I believe that they are amoral, there just happen to be a number of evil individuals that operate in markets. From what I can see Government intervention seems to reward precisely these individuals.
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I currently work for one of the big banks and meet the general public every day. It seems to me the banks have become really cynical. Speaking for my own bank they will only lend to customers who have a squiky clean credit history, if you have gone a pound in the red or have had one standing order returned due to lack of funds they wont lend. If they will lend it will be at a much higher interest rate then last year, also to add insult to injury the overdraft rates have gone up and saving rates are at rock bottom. If irresponsible lending by the banks has got us into this mess then the pendulum has certainly swung the other way.
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BANKERS BONUS CHEQUES
SEEMS THERES PLENTY OF CASH BEING FLASHED WITH HOUSE SALES IN THE
GREATER LONDON SUBURBS AT 2,000,000 PLUS BEING VERY ACTIVE THE
DEVELOPERS THINKS ITS BONUS TIME TOO. .
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This is just such a load of nonsense.
The banks say property is worth a lot, so computer says yes - and 45 percent of applicants details not checked when applying for a loan at the peak say the FSA. All the banks have much the same software and all the computers say yes, and keep saying yes so property goes up and up.
The banks say new game, new software, property not worth much, computer says no. Same property, same people, same income etc etc. Computer continues to say no. All the software in all the computers says no, because the banks are all running much the same software.
At some point the banks will say lets change the game and the computer will say yes.
What is the commonality - the banks just change the rules whichever way suits them. House prices up, house prices down, up down, up down, whatever they call. And what a surprise they are making money on the way up and on the way down from the size of the bonuses, and if there is a problem than the good ol taxpayer can stump up.
The next step - lean on the banks to lend money, some of this money supplied by the taxpayer. Oh dear the banks say they will withdraw from the market. Banks only make money by lending it otherwise it is pretty useless to them, so I can't see that happening.
Banks say not much demand for loans, what a surprise at double digit interest rates. The banks simply are not providing the function needed in an economy, so the economy suffers. The banks are dysfunctional so the economy is dysfuctional. Consumers are dysfunctional as a result.
How long are the banks to remain dysfunctional. On the stock exchange floor they suspend trading when the feedback loop on the similar competitive software packages all hits a common sell message to stop the downward spiral. In the economy we just sit and let the banks say computer says no, situation deteriates, computer says no more times, so on and so on. You can't run an economy on that basis. If you did you would ramp it up and up mindlessly, drive it off a cliff, and then ramp it down and down, mindlessly. Oh sorry, thats what they did.
Time to say enough is enough, and to sort a new conduit for the taxpayer money, just ask for it back, and if they can't do it then foreclose on them, there should be something in the small print. They ought to understand that sort of behaviour. Or pass a law and seize them. Bankrupt banks are not worth a lot are they. Not much compensation to pay there then.
Seems to me that the truely massive sums pumped into the banks is still not enough. BTW I am still waiting for the bank industry to explain where all these losses are coming from as in the UK mortgage losses are covered by the insurance which has to be taken out by the borrower as part of the package. Unsecure loans, well so what, that is a commercial error of judgement, nothing to do with the taxpayer. So just where are these losses coming from. Piped in from abroad perhaps, or basically gambling, if so what has that to do with the taxpayer.
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#91
Indeed, much propaganda
If I were a senior banker I'd cry off this meeting with the esteemed leaders with a case of the trotters
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Fellow Commentators,
Actually, I agree with John_from_Hendon #107. In the global internet age longterm manipulation of public opinion is impossible to maintain, there are too many uncontrollable media options available to vast numbers of people and propaganda cannot be enforced easily in liberal democracies. I am an optimist when it comes to the possibility of change in democratic societies and trust in the constructive intelligence of the human spirit. If all of you continue to write in blogs, communicate with your social networks, write your own articles and speak out whenever it counts, there will be change.
Surely, many tens of thousands of people are advocating for real change in the UK, similar to what continues to take place in the US, beyond political party manifestos. My own web sites and blogs have been visited by tens of thousands of people and hopefully have contributed to a more informed public discourse. Please continue to advocate for a fairer and more equitable society. Thanks.
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We're still heading for the rocks- have a look at the UK National Debt clock if you are brave enough I remember a few weeks back when I had only invested 10K and now it's closer to 13K. not too frightning but then I have a wife and four kids so I am responsible for 78K of Gordons investments which mean I need to pay about 2,000 a month to 'repay' this
sound Gordonomic investment. The frightning speed with which things are going wrong - just watch the clock for a couple of seconds and see your annual income written off stay a bit longer and watch Gordon spend your lifetime income
It takes a bit longer to see an mp's expense go through!
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114 Invisablehandadvisor
Great idea but if you kick up a FUSS on here or Nick Robinsons Blog they
bar you from posting my two user id's have been blocked today by the BBC
GREAT DEMOCRACY? I HAVE NEVER USED FOUL LANGUAGE JUST CHALLEGED THE
ESTABLISHMENT. THE UK BECOMES MORE LIKE A POLICE STATE DAY BY DAY.
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@112 glanafon: " So just where are these losses coming from. Piped in from abroad perhaps"
Great post, you sum up the surreal machine called banking perfectly. Maybe the losses come from Swindon? I see that toxic waste is to be sent back to the UK from Brazil, and officers have already swooped on the suspects involved!
It's wonderful what the law can do.
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I have just started a consultancy business (just myself) and despite having sizeable deposits and a 33 year history with one of these banks I still had to personally guarantee the new business account against all losses. I would think that somewhere in these statistics they will show this in a positive light to government, that they supported a new start-up business. The reality is we cannot believe any statitics given or reported and the level of service from banks is generally poor and getting worse. My views will change when my face to face dealings change and not when I read about it in the press.
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I think the Bank Of England are going to need a quicker printer as they will need to print about GBP 5,000 a second which is a ludicrous amount just to keep up with the Gordonomic policy of Quantative easing!
http://cluaran.free.fr/debt.html
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POST 118
PG'S are always asked for.Why do you need to borrow money to set up as a
consultant anyway?
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POST 120 (118) To register for VAT you must have a bank account. This was not about borrowing money, I didn't, but to simply open an account I had to give personal guarantees,
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POST 121?
Interesting thats a new one? Although its usually hidden in the
standard document for opening account/service agreement.
So have you signed a specific form for guarantee apart from the service
agreement for your account?
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I miss ALEXANDER-CURZON...
" 'alexandercurzon' is a 'Bull in a china shop'
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Bootlicker
Seems i am a new 1persona how long to get to 99 i wonder?
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Post 121. YES. I switched my phone/broadband over to a business account (need to for VAT) and guess what...33 years of direct debit payment of bills as a private customer mean nothing. I have to pay two quarters up front and if I go overseas I have to pay a deposit of UKP150 just to receive mobile calls. No one is making it easy, if you give any exposure risk to banks or businesses they seek PG's. If I was a risk I could understand. There are many less fortunate who are being held back. Going back to my point, statistics given and reported these days rarely reflect real life.
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The trouble with QE is that it's a trickle-down approach to stimulating the economy, which helps banks far more than it helps the economy.
If you are going to print money, that is create entitlement to consume goods and services in order to keep the economy working, you should give this money direct to consumers and producers and bypass the banks.
This approach was first proposed by Major CH Douglas, founder of the Social Credit movement:
http://en.wikipedia.org/wiki/C._H._Douglas
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Call me cynical (what me? Never!!!!), but give a personal guarantee for any kind of business bank account/loan, the bank can withdraw the facility at any time and come after your house.
They aren't stupid - just know they have us all over a barrel.
It's about time we gave them the same medicine - get all the high up bankers to give personal guarantees, then call in the loans.
See how they like it!
Nice dream!
Great to see you 1alexander-curzon! Missed you!
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The recently published Financial Ombudsman Service (FSO) statistics for 2008 shows Independent Financial Advisers (IFAs).are responsible for 3% of the complaints within the financial services sector while the bancassurers (banks selling financial products) are responsible for 59%. The FSO stats also show that IFAs have a market share of 80% while the banks only have 29%.
From these figures we can see that there is problem in the financial services sector that needs to be addressed.
Thankfully we have a powerful regulator in the Financial Services Authority (FSA) who has the power to step in and deal with such problems.
So the FSA are currently conducting the Retail Distribution Review (RDR). This review will review and restrict the way that IFAs work. Increasing their level of knowledge required to practice and not allowing them to take commission. All this has to be put in place by 2012.
The banks on the other hand do not pay commission to their sales staff but bonuses so that seem to be OK.
Ernst & Young believe that 10,000 IFA firms will leave the industry by 2012. This will cut the availability of Independent Financial Advice to only the wealthy few.
Many have also pointed out that the majority of key decision makers in the FSA have come from careers in banking and seem to want to reward the banking sector for their previous employment.
I think that the public are mainly unaware of way the distribution of Financial Advice is being carved up between the FSA and the banks.
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Why has the UK stock market risen form some 7 to 8 days in a row? All we have had is bad news and hundreds of thousands of swine flue cases per week. What is going on? The Corporate Bond market is also rising as Pension Funds seem to be investing in certain large companies by lending. Are the Footsie 100 going for Bonds and no longer going to the Banks? The New York market hit a 2009 record today and European markets rose well. There seems to be a lot of "investment cash" swilling about out there.. Meanwhile, the sterling pound is weakening against the dollar again.
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In the words of Corporal Frasier:
"We're all doomed!"
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#21. At 11:34am on 23 Jul 2009, excellentcatblogger wrote:
You have hit the nail on the head. The banks are too big....
Or is it that the UK is too small and unimportant for 'globalised' banks to worry about that much?
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#114 / #116
The establishment doesn't need to rule by fear or power these days. Our ignorance and inability to challenge accepted wisdom is the shackle we need to break free from:
http://www.bbc.co.uk/blogs/newsnight/paulmason/2009/07/a_very_british_arrangement.html#P83232872
#126 Sasha
A contemporary of Major Douglas was Frederick Soddy (Britain's forgotten great scientist and general antagonist to the economic canon). I thoroughly recommend the following:
http://en.wikipedia.org/wiki/Wealth,_Virtual_Wealth_and_Debt
Shocking how many thought-provoking books on the real dangers of money (mainly from the 1930s) just slipped into historical obscurity:
http://wwwm.biz.tc/wwwma1.html
Soddy's book was described by one reviewer as "one of the most important books ever written". It has some minor flaws, but I'm inclined to agree. Anyone interested in the question on RESEARCH INTO THE DECEPTION IN OUR MONEY SYSTEM would do well to look at this list, and "follow the money...."
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22. At 11:37am on 23 Jul 2009, akamrburns wrote:
"Make no mistake, SMEs are being totally stuffed by the banks."
What really suprises me is that anyone is surprised.
Why should globalised banks give a stuff about UK SME's? Or about the impact upon UK society of the UK economy going down the pan?
Now, I could imagine, say Santander being bothered if we were talking about the Spanish ecomomy, perhaps.
Many banks are too big to be 'reined in' by any single Government anymore.
We don't, in the main, have national banks - they are globalised. It's the smaller banks and building societies and mutuals that still exist at a national level and some of those only at a regional level.
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42. At 1:14pm on 23 Jul 2009, opinionsofmine wrote:
"I want the Chief Execs of my banks to represent my interests as a shareholder above all else. The taxpayer does not have any interest in the activities of HSBC and Barclays, so if GB, Mandy, Darling et al want the non-taxpayer funded banks to do something that is not in their financial interests, the Chief Execs should, on behalf of the shareholders, tell them where to go. Period."
Of course you do, because you are anti-social and don't believe in social responsibility. As long as you get rich, everyone else can go to hell.
Yes, it's that Great Anglo-American way of doing business, you go up by pushing down others. No, don't do reasoned cooperation for everyone's mutual benefit or long term investment and stability of commerce and industry. Just do, quick buck fast.
And it's people thinking just like you who milked the cow dry and got us into this situation.
Isn't it time you found a better way, instead of blindly following these muppets?
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121. At 10:31pm on 23 Jul 2009, Methody1972 wrote:
"To register for VAT you must have a bank account."
Actually to do quite a lot of things the Government demands you have a bank account - though that does not have to be with a big globalised bank.
But isn't that a cosy arrangement between banks and Government?
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91. At 4:58pm on 23 Jul 2009, Rugbyprof wrote:
I think you should have posted your comment at http://www.bbc.co.uk/blogs/thereporters/ferguswalsh/
rather than on Robert Peston's blog.
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Quote of the day from Max Keiser:
"There is no such thing as a 'naked credit default swap.' Trading something that has no cost basis whatsoever to another party who does not take delivery of an imaginary financial fiction does not constitute a bona fide transaction. Buying and selling avatars on Second Life has more economic legitimacy."
http://maxkeiser.com/
Unlike a manufacturer, a bank can whirl its production of financial products around and around - not only the buying and selling of the same thing, over and over, but also the Russian doll fiasco of instrument subsumed within instrument. So if as a bank I have moved a certain amount of money around 50 times, have I actually worked 50 times harder, have I "made" 50 times more productive output?
How long before we realise that the explosion of financial derivatives created little more than a monstrous Second Life of imaginary economic transactions?
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ALEXANDER-CURZON RIP who have you offended again?
Was it the Halifax or was it Israel again?
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Although I can completely empathise with the business predicament of the UK private and nationalised banking sector in wanting to generate a return to profitability in the shortest possible period who is controlling this process.
Business aside as a member of the public it is well documented your savings are accruing little to no interest after taxation yet despite a historically low base rate and LIBOR rate the differentiation between interest and lending rates is disproportionate in the extreme.
So we have the chicken and the egg situation of deposits verses lending ratios feeding the banking system as back in the days of old. Deposits are down so lending remains expensive so margins are met.
What I cannot understand however is why are we so concerned about the private banks profitability. If as the tax payer we have underwritten these nationalised banks why dont we bring these two indices together which will inevitably slow the exit from recession but ensure stable growth without penalising savers, homeowner and businesses alike.
For what it is worth I have absolutely no faith in Alistair Darling in any event.
My message would be less greed and perhaps more will survive this period which is in my view far far from seeing green shoots at the present.
Regards
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Very simply, the economy is returning to where it would have been had we not had Gordon's credit boom and bust. House prices fall, businesses that were built solely on the credit boom go bust. Why should more sensible lenders that weren't throwing money at the likes of the housing market suddenly be responsible for reflating Gordon's bubble?
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Or was it the BBC or ``Common Purpose`` AC
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Take a butchers at the spin on this very poor article, can I get a job at the BBC Robert?
http://news.bbc.co.uk/1/hi/business/8166457.stm
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Post 140. In three sentences you have summed up the true state of the UK economy.
For too long cheap credit, interest only mortgages and forever increasing credit card balances with 0% balance transfers perpetuated an illusion of wealth and affluence with no payback date in sight.
Now the house of cards have tumbled down and Gordon is desperately trying to find anyway he can to try to not make this look the total disaster it really is.
I know some people with considerable negative equity on property and huge credit card debts. As far as I can see the only realistic option for them is an IVA and five years of constraint but a clean slte afterwards or ten to twenty years of purgatory.
God only knows how bad things will get when interest rates rise again, as they surely must.
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129. At 00:06am on 24 Jul 2009, JohnnyZero66 wrote:
Why has the UK stock market risen form some 7 to 8 days in a row?
Because there is a hell of a lot of 'dead' money floating around, money that pension funds, insurance companies and Hedge Funds took out of the system when the markets were falling but can't get any worthwhile return on by just having it sitting around on deposit. Their money has to be 'put to work' so now that shares are (relatively) cheap they are putting it back in play. The doom mongers who are forecasting the footsie to be under 3,000 at the end of the year keep forgetting that with virtually zero interest rates and low yields on bonds that the stock market is the only place for institutional investors to make any substantial returns, its almost irrelevant how the real economy is doing, as long as they avoid the basket cases there are enough solid investment opportunities for them to make their money.
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142 JavaMan1894 the news article referred to states the following
"recovery could take longer than previously had been expected'.
So it should be sorted out in around 6 weeks or more.
(Once again, I have saved the world)
Screw Face
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I've been a small-business customer of LloydsTSB for 15 years and a personal account customer since July 1977. Whereas I've always had a pretty good relationship with the bank over those years, it's only since they've been effectively privatised that they've started to treat me (and other LTSB customers I know) with complete and utter contempt. Getting blood out of a stone is much easier than negotiating any kind of business credit with them now.
I'm really angry at the way this and other banks are being allowed to treat us in this manner. Vince Cable is absolutely right: LTSB should be carved up into smaller units right now and forced to go it alone. I'm sick of the way our financial institutions are being managed in order to serve the most greedy in our society and I wish Brown, Darling and co. would have the guts to force very real change upon them. Of course, they're all gutless and we'll see nothing of the sort.
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Whilst there are obvious and clear dangers in the banks retuning to the excessive and reckless lending of the "boom years" wheather we like it or not we live in a 21st century developed, industialsied, hi-tech economy that relies on business and trade to generate the taxes that lubricate the wheels of our everyday lives. To me it is blindly obvious that it is not in the long term interest of the banks to continue on their current policy of only lending to the "credit elite" and even then at over the odds rates of interest. ..... But as another contributor said the banks these days are global with only a passing patriotic consideration for UK PLC, and tax payers support or not I suspect they will listen, nod politely at Gordon and Co then go back to their ivory towers and proceed to do pretty much what they please.
However if it is any consolation I prsonally do feel that things are very slowly improving and the word is that 90% mortgages for first time buyers are very recently becoming just a little more available at fractional less prohibative rates, ......... so as someone else said, ....... things beginning to look a bit brighter just in time for the election. !!!!!!
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#142. JavaMan1984 wrote:
"Take a butchers at the spin on this very poor article, can I get a job at the BBC Robert?"
Are we looking at the same article? Where you see spin, I merely see a brief, straightforward report on worse-than-expected GDP figures.
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So they face "I'm not moving from number 11" Darling, "Phoenix" Mandelson, "Green shoots in a desert" Vadera and "how did Goodwin get that past me?" Myners. They won't need to spend much time getting briefed for that lot. More chance of a grilling from a wet haddock I would have thought. Golf as usual this weekend then boys.
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get used to heearing this line for the next couple of years....
"While an improvement on the previous quarter, the figures may indicate that the recovery could take longer than previously had been thought."
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#107 John_from_Hendon
"But I cannot be a pessimist and I do not recommend the state of mind"
I have debatedd long and hard with myself about this stance, however I have come to the conclusion that to constantly 'expect the worst' - I am never surprised or shocked when the worst happens, even better when the worst doesn't happen then I am pleasantly surprised.
I used to be optimistic but god sick and tired of being constantly let down by various members of society - mostly those in power - which made for a very depressing life.
The result is I am of a much happier disposition now - and I also get to say 'I told you so' in an annoyingly sanctimoniuos way a lot more than I used to!!!
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ALEX MAN
Don't become a STRANGER
Stay in TOUCH
Don't just say HI and BYE and get BANNED
we will always recognise you x
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There will be no 'recovery' of the kind sought after by the journalists and 'experts' appearing on television and in the newspapers. Whistling in the dark is what its all about at the moment.
The improved profits for UK & US banks are fake, as pointed out above, and depend on government subsidies. The financial crisis of last autumn has not gone away, but has merely been deferred by Bernanke and the rest of the clueless idiots who led us into it in the first place.
Watch closely for the first indications of a real attempt at withdrawal from said banking subsidies. In reality they CANNOT BE WITHDRAWN without a return to the situation last autumn. Brown, Mandelson and the rest in the UK only look for a 'boom', any boom, or mini-boom at least in house prices to save their worthless political skins.
But they are dead-men walking. An ecomomy that depends on speculative property inflation for its well-being is doomed, and not worth saving anyway. The bankers are praying for the return of securitization, but its just not going to happen.
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104. Beatsy and 134. Sutara
Thank you both for responding, I had begun to think my provocation had fallen on stony ground.
The thrust of the argument is that these banks are businesses which have a legal and moral obligation to act in the interests of their shareholders; and their shareholders do not number amongst them the UK tax payer. Therefore if what is good for the UK taxpayer is not good for the bank then the bank should not be expected to support the UK taxpayer (or government) at the whim of an unelected politician (Mandy).
If you look at what happened with Lloyds last year you will see that their shareholders were wiped out. Goodness knows what Victor Blank thought he was doing, but the shareholders paid a very high price and for what? How has the country benefited from the destruction of Lloyds shareholder value? Remember also that the vast majority of shareholders were you via your pension schemes which are all looking a bit sicker than they were before GB robbed you by foisting upon you someone elses insolvent wreckage - HBOS.
If you want banks to behave in a socially responsible manner regardless of profit then you would have to have them socially owned (a policy put forward by none other than Michael Foot (1983 Labour Manifesto) who got no support at the time). I am not unreasonable in this regard if the government wishes to nationalise the banks then they are for sale for, at the time of writing, 315.85p a share for Barclays and 580.45p a share for HSBC. In a law abiding democracy my property is not available to be pillaged at will be the government bought yes, pillaged no.
I would also argue that the banks are in fact already (belatedly) behaving in a socially responsible manner if you want a mortgage at 12 times your salary and 125% of property valuation you wont get one - unlike a few years ago. In my experience if you need a business loan they are available, on reasonable terms, provided that you have a STRONG business case. What is happening is that the flaky business cases are having their loans priced according to their risk profiles and if this path had been followed prior to the current downturn we would not be where we are now.
The socially responsible path is to reduce the amount of credit because we all borrowed way, way too much. Attempting to rob yet more shareholders by making risky loans that will probably default in the vain hope of re-electing GB is in no-ones interest.
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#46 ZOPA
For those seeking loans, #46 gave a good piece of advice: ZOPA. It's worth a try.
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It might be against the thought process but my view is that Companies dont want more loans but more customers.
If they dont get those and still borrow they are inevitably going to go bankrupt when they have used the resources AND additional borrowings and cannot make the repayments.
Cheap, reckless lending got us into this unholy mess, why would more of the same get us out of it !
Browns folly is growing by the day
Election needed NOW
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The key issue is what are we expectig from the banking system. Do we want them to be profitable generators of taxation? Do we want them to be serve the wider economic needs?
Clearly, the banks are behaving in a way to maximise their own positions within the context of the rules set by Government hence the larger spreads and their views on risks. Is this really in the public interest?
Free Market theory is well and good but banking is not free and I am not convinced that allowing banks to maximise their own positions serves the public interest of providing liquidity.
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To No. 103
Delminster, you're a lot more trusting than me. I wouldn't trust any of that quartet with a fiver. The Banks will
continue to commit usury with impunity. The only way to kickstart our economy would be to legislate
against the infamous high rates of interest charged on Bank Loans and Credit Cards. Monday morning's
meeting will be just another expensive farce to divert attention from the real cause of our distress - Banks
untramelled greed.
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#155. TaxDave wrote:
"For those seeking loans, #46 gave a good piece of advice: ZOPA. It's worth a try."
Only if you really need finance and cannot get it elsewhere. On Zopa's home page there is a summary of deals offered to members that day, and a typical APR seems to be in the range of 9-11%. (And that same homepage boasts average returns of 8.2% to members who are prepared to lend money). The mainstream lenders have been strongly criticised on this very blog for charging half of that.
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#154...watch out for Victor Blank's peerage for services rendered. HMG are probably culling the ermine as I write.
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The fundamental issue you consistently avoid to explain is where did all the wholesale money derive from in the first place?
This is important because it gets to the real root of the structural economic problems the UK faces.
The reason that there was so much 'wholesale' money available to be borrowed from overseas lenders is due to the huge trade deficit, we effectively exported a large portion of our debt to make up the shortfall from the current account deficit. Overseas investors were happy to take this surplus sterling and loan it back to us because of the stable economic environment that existed, which had the dual effects of keeping the exchange rate high and making credit relatively cheap. The US have a similar structural economic model. The proble now is that overseas investors are concerned about investing in the UK in the form of securitsed bonds etc. and therefore there is a massive gap in the availability of credit. The other effect has been the devaluation of sterling, the surplus sterling created by the huge current account deficit is no longer in demand to be used to make loans to UK citizens and businesses. What should happen now is that demand for UK goods should now rise both on the internal markets and for export, which should go some way to improve the situation with the trade deficit and reduce the reliance on the provision of loans via overseas investment. The debate that should be started is whether or not the government should have been doing more with respect to the structural make-up of the UK economy. Should we have had a policy to maintain the industrial infrastructure of the UK? Should the governement have had a better understang of these macro economic issues and taken the necessary pre-cautionary actions? Is the strategy on monetary policy correct in only targeting inflation?
Also, I don't agree that the only source for an increase in additional funding can come from the tax payer. The wholesale funding market was clearly flawed in a lot of respects but until we address the issues above and address the structural problems with our economy then some degree of wholesale funding needs to return. As long as we have a current account deficit this extra money will find it's way back to the UK in the form of loans in some way. What we need to ensure is that this root is transparent and risk is reasonibly priced in. As not all politicians are liars, journalists egotists or bankers thieves, then not all securutised bonds are toxic.
You are the business editor lets get down to the nuts and bolts of the root problems with the UK economy.
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#146 billbored
Perhaps you might try switching to the Cooperative Bank!
They have no greedy shareholders to satisfy and don't obscenely remunerate their senior execs (and with very modest bonuses to boot).
They were also named Best Financial Services Provider at the Which? Awards 2009.
In short, they are a very boring bank...
i.e. the way they all should be!
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151 Writings....
Way to go....!
136 Sutara
Thanks for the suggestion....
Just a note to say that a new chart is coming out showing the ALEXANDER CURZON VIRUS (ACV) affecting blog entries reported each week which has now of course mutated to the new strain AC1V...........doesn't matter what vaccine BBC moderators are using.......
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#151 writingsonthewall
I too have adopted the same approach for coping with all the establishment BS we receive everyday
Perhaps we could try emulating our leaders and develop some Narcissistic personality disorder
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154. At 12:19pm on 24 Jul 2009, opinionsofmine wrote:
"I would also argue that the banks are in fact already (belatedly) behaving in a socially responsible manner ...."
I wouldn't.
If I saw evidence of them trimming their profits a tad to make finance available more affordably to the UK economy, i.e. taking a longer term view rather than the immediate quick buck approach, I would perhaps reconsider.
Don't hold your breath on that one!
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165 Sutara
There is nothing socially irresponsible about making profit - we all depend on it one way or another; without it the tax take and public spending would look pretty sick. If finance becomes more affordable and more widely available people will borrow more and we have just seen where that leads.
It would be socially responsible of us all, on a longer term view, to borrow less, spend less and save more. The transition may be painful but we will have to do it.
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So how much of the contraction noted by the office of National Statistics in the British Economy could actually be because the banks haven't yet unleashed the necessary liquidity into the business market?
How about the whole of the BBC bloggers getting together and working on the Economy to give each of their views and thereby make up a whole picture for those without the contacts?
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Robert
How about a blog on Vestas the wind turbine manufacturer based on the Isle of Wight that is due to close next week? It is profitable with a stake in the US market. The decision to close is strategic as it says it makes sense to have a factory near where the wind farms are being built.
Yet the UK order for 7,000 wind turbines has been placed in Europe and China. What does the Business Secretary have to say about this? Or does his remit with his 34 other jobs mean that his responsibilities to British business takes a back seat?
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Post 168. I agree this is a big story.
The UK is currently the World's largest offshore wind energy producer and both the UK & Eire has a large and soon to be much larger onshore wind farm industry.
Having said that very few of the many new wind energy businesses I see have Vestas turbines.
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As someone who was made bankrupt last year as a result of Bank of Scotland pulling the plug on its property sector exposure, I am not sure what I want the banks to be doing. Preferably, lending less but with more certainty of building and retaining clear sector exposure. I appreciate this may not help all businesses right now but as other commentators have reiterated we all of us have become dependant on a level of debt that is unsustainable.
My worry is that the banks return to profits will be at the expense of the old gimmick of writing down as many loans as is possible that may appear bad, and reaping the benefit of securing full recovery. Such income is a false measure but one which has massively improved their performance in past recessions.
Such write downs affect their lending to different sectors and should be looked at in much more detail by regulators. I think it important that they adhere to a common standard. If this were applied to all banks, it may reduce the negative impact on businesses by forcing banks to be more optimistic about future performance of loan portfolios.
It may well be argued that the tax payers will benefit in the medium term if this is left unchanged;higher share prices relate to greater public dividend. My guess is that the short term consequence of individual companies and whole sectors suffering an undue restriction in availability of debt is of far greater cost to the taxpayer.
I wonder if it isn't time for a new bank for enterprise that is focused on expansion of industry and not of bankers/shareholders wallets. A state controlled bank that links credit availability to economic growth and skills is not new....but it is about time the UK did something really different and actually put it into practice!!
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IN MEMORY OF ALEXANDER_CURZON I WRITE IN CAPITALS...
SWINE FLU = FLYING PIGS
ITS ALL A DIVERSION!
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170 Siberianwinter
As a business owner my sympathies to you. Interesting proposal and one that has been suggested on more than one occasion. However, the nationalised nature of lending wouldn't necessarily get rid of the problem in that it would be open to inefficiency and sadly corruption.
For example we already have effectively state lending in thousands of social enterprises. There has already been many instances of questionable practice and there wiill be more to come. Thus the national bank road is also fraught with danger and one that brings new issues, for example, how does the surplus get distributed (technically it should come back to the taxpayers - think of the logistics and squirming with that one)....
May I propose a more radical suggestion (and one which has big implications). First of all take all the tax benefits away from any leveraged loan scenario (which certainly distorts the market for the worst in terms of excess) whether business or bank related.
And if that isn't enough then perhaps we should consider to ban credit altogether or make it so punitive that it is not worth it. There may be a long transition period...
Thus businesses could only rely on equity and customers to fund the business and banks could only rely on savings and equity capital to do the same.
Personal debt could be limited to a nominal amount. I know people would cry - it will bring the economy to a stop. Well yes but its already at a stop. I said as a transition phase.
Even governments could be banned from borrowingand mortgaging their future generations. Just think where Africa could be if it had not taken a single dollar of borrowing (or for that matter South America, or now of course the former Eastern bloc countries)...
As I said its a mere suggestion which needs plenty of consideration.... however......
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For the last 18 months I have been a management consultant working with small/medium sized companies, usually ranging in size from 5 - 25 employees with turnover of between £250,000 and £750,000. A consistent and disturbing trend across the vast majority of the companies I have dealt with in that period has been that the UK banks have not been as supportive and prepared to lend as they were in previous years. In the last week alone I have met two small companies whose clearing bank has unilaterally decided to withdraw their overdraft and replace it with a term loan, thus making day to day trading much more difficult than it was. The same bank is involved with both companies, although one of the clients is based in Surrey and the other in South-East London. I have seen a very real tightening of credit for my customers, which is compounding the effect of the recession and making their business much more precarious. Before any of your readers leap to the defence of the banks and say that these clients must be high risk, I would mention that I was in banking in the 1970's (before it became a dirty word!) and then in equipment finance until the end of 2007 and I am a trained credit underwriter and risk analyst. That is not to say that I didn't make some lending mistakes, but my point is that I am not someone who has a rose-tinted view of my clients or the world in which they operate. I started in banking in 1972 and have worked through three major recessions and in my humble opinion the behaviour of the banks in the current recession is very different indeed to their behaviour in the recessions of the mid-1970's and the end of the 1980's/early 1990's. Sadly this tightening of the purse strings is not confined to the bank I referred to earlier, I have seen it pretty consistently from all of the main UK clearing banks.
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Good insight srconsult 173
I have previously worked in banking and factoring 80s. I've also got a Masters in Finance. We set up our business back in 2002 and like many had to leverage oursleve sto the hilt to compete. Thankfully we are still alive today.
Also thankfully, over two years ago we did an analysis and saw a high probability of the scenario the nation now finds itself in. Knowing banks as I do we surmised that it was time to reduce our exposure.
We have doen so to the extent our overdraft facility is now only there as a reserve. We will look to withdraw it next year. The business continues.
I would advise all SMEs to reduce their reliance on lending as much as they can because this is going to last at least another 2 years.....
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#171 DebtJuggler: "IN MEMORY OF ALEXANDER_CURZON I WRITE IN CAPITALS...
SWINE FLU = FLYING PIGS
ITS ALL A DIVERSION!
PERHAPS WE SHOULD ALL WRITE IN CAPITALS AS A PROTEST AT ALEXANDER BEING BANNED?
HE'LL HAVE HIS "SPARTACUS" MOMENT YET!
WHAT WE NEED FOR BETTER BANKING IS PROSECUTIONS FOR TRADING WHILST INSOLVENT.
THAT WOULD "CRUNCH" THEM?
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159. At 1:02pm on 24 Jul 2009, rbs_temp wrote:
#155. TaxDave wrote:
"For those seeking loans, #46 gave a good piece of advice: ZOPA. It's worth a try."
Only if you really need finance and cannot get it elsewhere. On Zopa's home page there is a summary of deals offered to members that day, and a typical APR seems to be in the range of 9-11%. (And that same homepage boasts average returns of 8.2% to members who are prepared to lend money). The mainstream lenders have been strongly criticised on this very blog for charging half of that.
ZOPA is an alternative to the bank - All lending is risk, and a saver on ZOPA is not protected up to £50,000 as with a bank. The banks have a problem with very low interest rates because risk is priced too low, and there is no incentive for people to save with them. Better to move interest rates back to 5% to encourage saving and lend out this money at say 7% or 8%. A dragon in the den will only invest in a business that has good prospects, and the banks and economy are now learning the hard way that they took excessive risk in the past. Overall, getting debt down is a good thing and the less money that business or individuals have to borrow from banks the better. The problem with the economy is the huge debt addiction and weaning ourselves off this.
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Wisely, nobody ever says to me, "I've Got A Great Idea to Make Money But I Need Your Help." Both sides of the equation would come up empty: (1) I lack the kind of entrepreneurial skills to turn a great idea into a cash cow, and (2) I havent got the shekels to bankroll anybody else's.
But I can dream, and this concept has me soaring:
Liposuctioning unwanted blubber out of rich fatties such as merchant bankers, may not seem like a dream job, but it has its perks. Free fuel is one of them.
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17. At 11:04am on 23 Jul 2009, whizbang2005 wrote:
I for example had my 10k overdraft facility removed after two years of paying for the facilitiy but not needing it, and the month I do need it, it is taken away.
=================================
It wasn't LLoyds weas it, they did exactly the same to me, I asked why reduce it, if I wasn't using it was it a problem to them? But I needed it last month and next, and now I'm stuffed, as they are charging me and say if I exceed the new limit next month, they will refues to honour those payments.
I have to try and sort it out over this weekend. Still, I told my Labour MP that he nor any of the Lib-Lab-Cons will get my vote, and I got a letter back, I may even open it. but I'm so p****d off with MPs that I can't stand reading 'Unoprecedented crisis, global problem' blah blah blah so it's unopened.
I know what I think they are and it isn't B ankers.
Which brings me to the depressing news that the Tories got a 16% swing in Norwich, you would think that they were the Whiter than White over expenses etc! I don't mind a 10 seat Tory Victory, but not 100 please! We have Blair Mk2 about to take power!
Finally something amusing/annoying, my 13 year old has taken to playing a game whenever Brown is asked a simple question, the one where if you say 'Yes' or 'No' you lose, and, so far, after a week, Brown hasn't lost - he would have won a fortune on that gameshow. The problem is I'm now doing it, and it's driving me nuts, I have to stop watching him.
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140 You have hit the nail on the head.
We are moving away from the "Enron accountancy" of an "Enron Chancellor" and Labour doesn't like it, as its economic growth (if there was any) was built on a lie. Let's wait until the truth about PFI to come out and we will really see the reality of Gordon Brown's mismanagement of the British economy.
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This comment was removed because the moderators found it broke the House Rules.
http://news.bbc.co.uk/1/hi/business/8167784.stm
they are doing us all a favour by making more money because they are having to borrow from their savers, these are the ones they are paying miserable rates to for their savings, the very same ones they borrowed from before 2001 before they dipped into the world market to increase their market share to pay themselves big bonuses, and the want to cream it in to get off government life support(which is inlikely to happen) so that more money can be siphoned off from the people with some money to the people with loads of money.
magic
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"Right now we appear to be as far from ever (as far AS ever?) from reconciling the conflict between the short-term imperative that banks lend more, in order that the recession isn't too prolonged,...."
Translation: things need to look better quickly because Labour have an election to try and win.
".... with the equally important long-term imperative that they lend considerably less".
Translation: once the election is over they, whoever is in charge, will have to pull the plug on over-lending to stave off bankruptcy, but will have 5 years to properly sort the mess out.
Robert, it would appear the banks HAVE learned their lesson, while our government is still a bunch of short-term chancers.
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Why is there any confrontation? The government owns seventy per cent of the shares and should be strongly represented on the board. The govt directors should have the power to veto bonuses and sack the remaining directors without compensation for loss of office? New contracts would have to be drawn up and anyone not wanting to sign could go. As it is the govt has handed the existing banks huge sums of money and then lost control of its use.
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I have some sympathy for the dilemma that the lenders find themselves in. Not mush seeing as it was there own doing but here is the problem. They cannot raise adequate money from the money markets so they are having to rely somewhat heavily on depositors savings to fund lending. They are also under massive pressure to sure up the financial foundations of the company. Now BOE base rate at .5% will not attract much saving so lenders like Halifax are offering fixed rate savings of 5% (albeit on limited balances) they cannot then lend money out at 3%, meaning demand is down. Secondly they cannot get back to the levels of 100% LTV's as it is irresponsible. Whether we like it or not the current approach is working, the UK's personal debt is shrinking month on month and lenders balance sheets reflect this with greater capital adequacy. As an advisor on the front line I can tell you that lending in recent months has become more frequent but the higher risk more marginalised lending is as difficult as ever to obtain.
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What the Banks and the British people need is a General Election so whoever is in Government has a 5 year window to try and sort things out. At the present time the Government and business are in a state of paralysis.
If the PM was seriously interested in the UK he would call an election for October (no doubt after the Labour Party conference in the last week in September).
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I read in the FT that the Bank of China is now offering mortgages to UK customers at better rates than the UK banks and building societies...
What I wonder will be the long term implications of this.
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#183 Jenblog
...please let me explain. The banks own us and our government; it's not the other way around!
Why else do you think our government handed over huge sumes of tax payers money to entities they appear not to control?
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Can I just ask one thing? How is it that when I applied for a loan and was accepted,the company wanted to charge me 48% A.P.R.!!! Obviously I did not bother.It was for £2500 and to be used for home improvements. I proved to the company that I am in continuous full time employment and they still asked me to pay some £148 a month over 36 months so that I would pay back some £5328.How do these Financial institions expect us as the consumer to regain faith in them when this is the sort of rubbish that they get up to?( Thats rubbish spelt S*** by the way).
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I was so delighted to hear that banks are starting to do so well and can afford to carry on paying enormous bonuses again. What is even more pleasing is how much they are letting the public taxpayer contribute to their wealth on top of what we have already contributed.
Just this week only one credit card company advised me that they are putting up their interest rates very substantially despite the lowest level of interest rates in hundreds of years
I suppose that this will end up in one way or the other replenishing the number of billionaires' in our midst.
Well done the government for saving them I say, though it would be pleasant if they could explain why.
PS Shame about the soaring level of unemployment, but you can't have everything I say.
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Small is beautiful!
Reduce the size of the animal so that it knows what the right hand is doing.
Banks can reacquaint with their centre of gravity etc. Otherwise, you get an unmanageable beast good at b-llsh-t but not much else.
The Bank of England is King, make sure all others run with the pack, no nonsense!
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Small is beautiful! Whether banks, schools or other social facilities. The personal touch has gone from our society. Everything has been controlled and sanitized, except the banks given free rein, motivated by greed. I think there is a better place somewhere in the middle for our future prosperity.
Reduce the size of the animal so that it knows what the right hand is doing.
Banks can reacquaint with their centre of gravity etc. Otherwise, you get an unmanageable beast good at bullshit but not much else.
The Bank of England is King; make sure all others run with the pack, no nonsense!
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Left a good job in the city,
Working for The Man every night and day,
And I never lost one minute of sleeping,
Worrying 'bout the way things might have been.
Big wheel keep on turning,
Proud Mary keep on burning,
Rolling, rolling, rolling on the river.
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The banks' treatment of SMEs is the most destructive of all the shortcomings of the banks in the present economic climate. The vast majority of the working population are employed by SMEs and those companies respond quickly to opportunities and new ideas. Denying them lending is much more likely to prolong high unemployment levels than anything else.
However, the banks can see an immediate high rate of return by acquiring money cheaply and lending to the retail customer sector where the margin is enormous. In my days as a corporate banker we used to say that "you crawled on your hands and knees into a large corporate borrower for just a quarter of a basis point" Not so with the SMEs - who have to pay much higher rates and yet the risk of a disater, if one fails, is minimal. Taking all the small businesses that any bank lends to the failure rate of these SMEs as a percentage of the total loan book is usually modest.
Darling should make it clear to the banks that the terms of the state funding require and expect lending to SMEs to be the key measurement as to the continuance of support to them..
NatWest and Lloyds seem to be the worst offenders.
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I agree with the comment about the banks not making credit available as easily as it was prior to the crunch. Domestically the banks and building societies should not be increasing mortgage loans to houe owners simply because the value of their house has increased, unless the loan is totally going to be used on improving the structure of the property. In addition the property should be inspected by the banks after the work has been completed against the bills to ensure that the work didn't include a round the world cruise!
However if people were to want to move to a larger house then the total mortgage should be a function of the total annual income that the household has. I would suggest a sensible maximum of 2.5 times and no more. That would stop "sub-prime" loans and all the rubbish that we hear about people living way beyond their means.
The banks, bankers and the populace have all become too greedy. Unfortunately the banks and bankers would appear not to have learnt the lessons on the past 18 months with the banks trying to up their profits into the £ billions and the bankers expecting bonuses in the £ millions. If that is not greed and avarice, what is?
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A key reason why the banks are not lending is that the morale within their staff is at rock bottom. I think they will feel completely powerless- frightened to lend in case it goes bad and they get chopped. I think in recent years bank staff have forgotten how to communicate with their customers and so are unable to talk to them so that they get the necessary information to ut forward a sensible proposal to their credit committees and they are alos unable to explain to their customers why they are offering the terms they propose or what it means to ask for PGs and the like. It is not good HMG directing banks to lend to SMEs or for the dorectors to say they in fact are doing so if the troops on the ground are like rabbits caught in headlights
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#194. huggy79 wrote:
"However if people were to want to move to a larger house then the total mortgage should be a function of the total annual income that the household has. I would suggest a sensible maximum of 2.5 times and no more."
So a single person earning £50,000 should only be able to borrow the same amount as a married man earning earning £50,000 but who has a wife and two young children all depending on him?
You haven't really thought this through, have you?
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I run a small business. We bank with Bank of Scotland (BoS). We need two new facilities for separate projects. We have been told, point-blank that, in effect, BoS has no money and has no intention of extending facilities to us, regardless of the quality of our business plans and/ore the degree of risk.
The British banking system is in chaos. My business is at risk. The British people are being taken for a ride by the bankers and our grossly incompetent political class.
I predict socio-economic chaos in the coming years, whilst bankers and politicians continue to draw their salaries, bonuses and expenses ... all funded very nicely thank you by British taxpaying mugs.
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Crikey Robert, that was a particularly long reiteration of what we all know.
Isnt it time to move the debate on, accept that we are completely screwed for a considerable time, roll our sleeves up and start to lay the foundations for something new?
How many more times do we want to watch and analyse the death scene of the current economic model?
All the time we do that we lose valuable time in developing what will be anew system for the future. If we move the debate on NOW and come up with something that may work outside of the current busted system a great deal of human misery could be averted.
Worth a shot d'ya think, some of us do at lobbygroup.org.
If you all wait for the current batch of politicians and economists and other leading financial people to sort it you will be waiting forever, they are leveraged to the hilt in the current system and can not even percieve there is something wrong with their system, let alone consider the radical change neccesarry.
These opportunities to change something fundamentaly only present themselves once in several lifetimes, lets not be the generation that missed it.
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Why oh why are we still listening to the very people that caused all this credit crunch in the first place. Same sh*t different people or same people different sh*t, unless you change the mind set of the people who are causing all the problems, or get rid of them for good you will be in the mire for a long time. There are NO new ideas, those responsible are still basically in charge and would not see a good idea if it bit them in the throat. Its all about profit and screwing everyone for as much as they can. For all the media hype and obvious global recesion we are in, the very same people that took us to the brink are still in the driving seat, GOD help us all. Wake up people, time for change.
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This comment was removed because the moderators found it broke the House Rules.
AFAICT the measures taken to secure the banking industry in the last year have been effective in stopping the immediate collapse of the entire banking/insurance sector.
The downside of the measures taken is global recession, we are now at the end of the banking saga.
Global production is slowing, orders are being delayed whilst stocks are run down, small resurgencies in orders are due to running down part finished products.
We will begin to see range rationalisation fairly quickly, firesales will thin out and prices will begin to stabilise and rise for consumer goods (37in LCD tele will maintain price for longer), timescale for new products launches stretch.
We've had the Banking Squeeze, here comes the lifestyle squeeze
They need to sell a lot of tele's at 300 quid to make it worthwhile operating a multibillion dollar fabrication plant, margins are tiny and they rely on volume production to decrease unit cost, when demand falters unit costs rise.
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We should focus on the problem of the moment, that is there is not enough credit for medium sized businesses, many of whom are quite viable but are being put out of business by their bank. The problem of over bank lending which got us into this mess can only be addressed once we get through the worst of the recession. As a nation we cannot win this financial war with a fifth column of bankers who have no loyalty to country, customer or shareholder but only to their own bonus. We can only pull through this if we pull together. The example of the USA is instructive. There the new president evoked the spirit of valley forge to face down the crisis. Americans with money were not listening and are investing in China where returns are greater. Thus while the USA has a trillion dollar deficit the Chinese sit on over 2 trillion dollar reserves. We need some very firm directive leadership to get through this.
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The government is desperate to get this economy back on the road again. Its economic model demands it. The borrowing it is indulging in, to preserve public sector jobs and finance increased social security payments, can only continue for another year or two. After that public sector spending will have to fall if the economic conditions haven't improved. Buyers of Gilts will demand it or they wont buy Gilts, then we're stuffed. I also get a feeling that this whole strategy of borrowing up to 100% of GDP is designed to get them over the next year, get slaughtered at the General Election, then point the finger at the nasty tories for sacking public sector workers as they strive to balance the books.
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I have had a very bad experience with "Account opening" procedures - forget lending. I have an exisiting profit making Business. But Barclays - the so called banking giant did not open my account due to their pathetic process. Banking here is worst then the so called under developed country. I have taken up with Fianancial ombudsman & I am waiting - to take up the matter legally.
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#202 and #203
Two good posts that in my opinion get to the root causes of this financial crises and all that is wrong with OUR country!
I like #202's description of bankers as fifth columnists; such an apt description. I would go one further and label them quislings. However, #202 only covers one half of this country's enemy within...
This is where #203's post covers the other half...our current government. They have cynically adopted a 'scorched earth' (or more apt description scorched Britain) policy in order to make the situation far worse after the next GE. The word cynical is not strong enough, perhaps the word should be EVIL policy; for it it will be the poorest in our society that will be subjected to the worst effects of the austerity measures that will surely have to follow.
It was quite telling when James Purnell recently resigned that he proclaimed his love for the Labour Party in his resignation letter...and yet never mentioned once his responsibility as a serving government minister to this now pitiful country.
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Some perspective is required I think.
All but two of the banks mentioned are state owned. To think that any of the incompetent incumbents within the treasury are going to have any real say over anyone else's private companies is laughable!
In fact, I couldn't look at Alistair Darling in the face and not laugh.
Seriously though, the banks/credit card companies are making a fortune out of the current rate nonsense. My credit card is still at 15%! I also have a loan at 7%! I would love to consolidate my loans but my bank will not entertain the idea. Only a couple of years ago, they were willing to give me just about as much as I liked unsecured. If anything, these banks should be actively seeking to consolidate loans at a much more agreeable rate to ensure that payments can be made and that their clients have more disposable income to invest/spend with. A stable economy is in their interests as much as it is for those hanging onto government buy their fingernails!
Please excuse my cynical manner but the chances of the banks doing anything NuLabour requests is as about as likely as the government getting re-elected!. Not very!
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#203. mahavati wrote:
"The government is desperate to get this economy back on the road again..."
I think it's fair to say that we are all rather keen to see the economy back on the road again.
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Give I And I Some Work
Filed in Knowledge,
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wee-scamp
Bank of China offering UK mortgages at better rates..what are the long term implications of this?
Slavery of the British people. To the Chinese(Manufactured goods)
To the Arabs (Oil)
To the Russians (Gas/Minerals)
To the Indians (Services)
95% of the British people ( those not at the top of the pyramid) can expect their standard of living to be cut by one third in the next seven years to a level akin to that of Portugal in the 1960s. This is what the criminals in office are not telling the people.
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moraymint.
"all funded with British tax payers money"
Then dont go along with their venal plans. If you are in work, Resign ( no more Income tax or NI) Do not borrow ( credit = debt = slavery ) Do not spend (no more VAT,Fuel taxes, Alcohol/Tobacco taxes, Car taxes,
Airport taxes ..etc) Bring the rotten Pyramid crashing down. Force their hand and rebuild a new Society from the bottom up where power flows from
the Legitimacy of the People to their representatives at the top.
Taxation with Representation I believe its called..
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#209. honestgradgrind wrote:
"95% of the British people ( those not at the top of the pyramid) can expect their standard of living to be cut by one third in the next seven years to a level akin to that of Portugal in the 1960s."
This is a completely fabricated claim. A lie.
If nothing else, a cut of one third in British living standards wouldn't even reduce them to the UK ib the 60s, let alone Portugal.
In fact, despite the recession, most people in the UK have a higher standard of living than they did a couple of years ago, due to historically low mortgage rates and low inflation. I certainly have never had it so good.
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#210
Really stirring stuff !!!.Fueled by the Sunday tipple methinks (nay hopes).
Bit more thought required as to consequences perhaps.
If you read your input tommorrow and are not concerned well good luck to you!!!
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Swine Flu will free up Job market
For The Three Million On The Dole
Some from University and the
School Leavers in Job Centre
Still waiting for their cheque
What a situation on the nation
Oh. What a policy for 3,000,000
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Some from High School
Some from College
There is no Opportunity
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tomorrow's meeting will achieve only one thing: NOTHING AT ALL!
In case anyone has not noticed, we are all being taken for a ride, in a very open way too -
Unless there is a mass realisation that the current system is fundamentally flawed and that we need to reassess the way our economy operates - and most importantly review the economy's disproportionate reliance on financial markets as well as financial markets themselves (mostly a serial generator of one burst bubble after another, rather than a real economic indicator) - all this talk about whether any measure taken so far is working or not is POINTLESS!
All measures to date have been patch up work to show that something was being done, but it's all been marked by a great fear to make any REAL CHANGES and a great eagerness instead to go back to 'BUSINESS AS USUAL' - so noone should be surprised that the banks are behaving the way they are despite the billions that have been pumped into the system by us - the basic principles that have underlined financial markets' practise for the last 30 years (at least) have not been touched or looked at critically at all!
In my opinion we are going through a 'great phase of denial', not too dissimilar from the Soviet Union under Gorbachev: make some moderate changes but do not touch the basic system as the underlying tenets of it are just right...
This comparison might seem exaggerated, but maybe if we start looking at our current sistuation in that kind of light, we would be able to make the kind of strides we need to achieve the fundamental changes that would get our economy REALLY working for the benefit of all concerned, and not just the small minority at the top!
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Dear Peston,
Just returned from BBC!s 23.00(I.S.T),hours news,and from This week end From Mr.Thomas,i have grsaped of your writing on Business still being crunched by banks.
Your entire country!s economics are very bad.Still,you have not recovered from reall recession sickness.
Please careful ,while giving more financial support to RSS and Llyod for running it,may creat a big problem in later years.
Always big,medium business enteprises demand more money for suppressing their financial irregularities,and for keeping companys long name for further adjusments.
Economic theory says that,for any development on jobs creationg,starting big manufacturing units,more money for natural resources creations are worth to give more concessions,budget allocations from British Treasury,and from Government banks,from World Banks.
If,British government,banking agencies keeps on giving more cashes,some bail out exercises to these troubled financial institutions.
What will happen?You knew very well,what happened to world famous companies,financial banks in USA were doomed.
The main responsibility rests with English government and with Bankers Bank in England.
There should be matches of government revenues in terms of taxes,foreign exchange reserves,interests,fines,penalities,any special levies ,public long term deposits,profits from public institutions with major expenditures like,salary,pensions,education and health care commitments to citizens.
As per world views,all developed nations on historical terms ,entire cash reserves went in vain.
This is very sad to note,watch and failures of well known economists,nations planners and rulers.
Who is suffering now?The answer is poor,middle class,senior citzens in Britain and from rest of the world.
To sum up, the best way to get rid of from this serious economic cancer,better to close down all irrelevant,heavy loss units either big small,medium,then minmise the salary,perks to government servants,corporate executives,armchair planners and to other unproductive elements.
As a well reader in economis,sociology,public finance,politics,and in general,please formulate a new,vibrant,foolproff mechanism,cystal audit mechanism,heavy taxes to all big film producers,artists,well earned singers,capitalists,more big real estate promoters,very luxery spenders at the earliest.
Then only,Britain and rest of the world see a real Sun ight.
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This Blog seems now to be more akin to a small sailing ship on the high seas, lost all bearings and approaching a hurricane.
We no longer trust politicians, we no longer trust banks, we no longer trust the media particularly the BBC WITH ITS LABOUR BIAS clearly showing today
We are going back to animal instincts, experience, savvy, gut feelings and emotions. Our minds are on overload and we have lost perspective. We non longer have an idea where we are going, but are tired of worry and anxiety. We need Leaders, but none are showing, we need a sence of Nation and to be proud of being British as our soldiers die each day in pointless Wars.
We are approaching dangerous times, as 3 Million unemployed and many of those young and angry, a New Way will be found, by blood, sweat and tears, one way or the other. I never related to Guy Falkes as a child, why would anyone wish to blow up our Parliament? I do not want it destroyed but I really wish we could replace most of those sitting there and as quickly and peacefully as possible
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Lies, Damn Lies and statistics.
The most important individuals to get us out of recession are private sector taxpayers yet they are treated with no respect the government strategy of taxing them to death is short term and misguided.
In addition, the new generation of entrepreneurs are no where to be seen as the banks will not lend and they cannot get started
My brother has fought for a year to get a bank loan for a small london business making a profit and employing 8 people yet no loans are available and all denied for a pathetic range of excuses. e.g. it turns our the business loan guarantee scheme, is not available for companies which made a trading loss in the first two years which excludes 90% of the small businesses out there. Yet this is a scheme Labour shout about saying how much support it gives small business.
The government need to make the rules fair and give genuine entrepreneurs a chance. Find ways to help them, not find ways to wriggle out of giving them support which is currently the case.
The way things are going, the country will be bankrupt as we are not encouraging entrepreneurs.
The rules the banks have for lending ridiculous. They have set the qualification bar so high that most business fail thier applications.
The banks should be asshamed, but alas, the greedy have no morals.
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WE HAD BIRD FLUE COMING SO THEY BOUGHTS LOTS OF TAMIFLU TABLETS
NOW IS A GREAT EXCUSE TO USE THEM UP AND TAKE WHATEVER POLITICAL CAPITAL THEY AS GOVERNMENT CAN MAKE FROM SWINE FLUE
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The boards of the big banks are making mugs out of this government. They've taken the money and run. It is part of their strategy to simply ignore the concerns of the UK people. Mine you - the EU is coming to teach them a lesson.
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Mr Darling
Read This
I am the finance director of a 100 year old manufacturing business that moved to RBS last year. So far they have forced us into selling our one asset at the bottom of the property cycle (and in haste which cost us £750k) but paid down the banks £1.75m secured overdraft.
Now, having given them their "pound of flesh" we are being held to ransom over our Invoice Discounting facility. The interest rate has gone from 1.25% above base to 4%, the service charge has doubled from 0.35% to 0.7% and the renewal fee, quoted last year at £16k has been quoted at £50k. All this on a facility that has reduced from £3.2m to £2.4m as our sales have dropped 20%.
If this is what Mr Darling expected when he wanted the banks to rebuild their balance sheets then I shall give him one of my son's violins. He can play it as the wealth generating businesses, struggling in the wake of the catastrophe his boss presided over, are bled dry by the banks that he bailed out with our money and the whole economy comes crashing down.
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#221
Sounds about right, makes my blood boil, all presided over by a LABOUR government. I just can not figure out how we are letting them get away with it.
To rub salt in an open wound a great deal of the boardrooms of the banks are staffed by knights of the realm. People whom have supposedly won honours in the eyes of the nation for their selfless devotion and service to society.
THEY STILL HAVE THEIR KNIGHTHOODS!!!!!
Are we supposed to look up to these guys, is spivery the new highest moral standard we should all aspire to!!
We have lost so many of our values and freedoms our ancestors spilt blood for with no more than a whipmer in between flipping channels between reality TV shows.
I just don't get it.
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Banks are not helping the business customers in retailing sector especially Convinence stores and other small buisness . If Bank lends the money to this sector the rate of interest is in the region of 7% to 8% which is more than a personal loan rate and apart from this banks are charging nearly 1% to 1.5 % as arrangement fee. I hope govt. should review this area also.
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Can you people not see what's going on? The situation vis-a-vis lending is devastatingly simple. The banks are playing poker against the Government. They know that all they've got to do is sit tight and do nothing. The Government will eventually buckle and go on bended knee to the banks to start lending and finally they will offer the banks what they are holding out for - they'll underwrite all new loans in full.
Then the banks will lend and the housing market and credit market will bubble again, but tthis time when it crashes, the banks will have already covered the loss and the Government (taxpayer) will have to foot the entire bill themselves.
As the meerkats say - simples
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#221
grim, but probably 'on the money' - and we (average citizens) will just sit and watch this scenario unfolding, doing absolutely nothing at all about it.. because at the end of the day we are thinking 'what can we actually do to stop this and, most importantly, how'?? vive la democratie..
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apologies, my comment above was in reply to post by Red Lenin (#224).. and not 221.
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My daughter wants to buy a new car for £9,000. They want more than 8% interest. My bank wants 8.5% they say "we are competitive with other banks". Collusion or what? How much are they paying me on my ISA? Simple solution: lend ISA money to my daughter.
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For those who are still baffled why the current crisis came about, read BELOW.
http://gregpytel.blogspot.com/2009/04/largest-heist-in-history.html
WARNING: it is not for fainthearted.
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if we import more than we export,we run out of money. the same applies if the economy is out of balance i.e. our consumption of goods and services is greater than supply our currency should devalue. i say should because speculators and governments interfere but eventually it will devalue
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Building their balance sheets on the backs of the people they shafted...the people who rescued them. Snuffing out small businesses whose ability to trade profitably has been trashed by the actions of the banks...this is the stuff revolutions are made of!
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The govt BOE and The FSA foisted ridiculously high capital ratio requirements onto the banks to ensure that could withstand an unimaginable collapse in the economy. It was never going to happen now was it. Ludicrous scaremongering by the journos saw everyone stock up on tinnned foods and bottled water. Now we are seeing green shoots bursting out everywhere and our State controlled banks are flying because the smart money has worked out that they are and have been making loads of money which will see them soon in a position to rid itself of the Govt interest. I remember the stick I got for suggesting that the banks may be worth a punt back in March. Guess who is laughing now. Smell the coffee guys - the bank shares have only doubled so far
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The tail is wagging the dog here. This morning on the Today programme the charges and margins bankers are imposing on businesses were openly defended by bankers representatives as part of the need to improve their balance sheets. That's an outrage quite frankly.
As I've said before on here, the Government needs to intervene to ensure banks' balance sheets are improved ONLY by raising new capital. That will mean shareholders will have their holdings diluted yet further and it may mean more Government money is needed in exchange for further increases in its (our) holdings in banks. If that is the case then so be it. And there will be a real benefit: shareholders from hereonin will, if they're properly made to feel the pain brought about by the corporate leaders they elected, take more care in ensuring proper governance of banks.
As it stands businesses, especially small businesses are being bilked, and are taking the pain that rightly should be borne by the shareholders. Margins of interest and loan and overdraft fees have been raised to ridiculous levels. This will put otherwise viable businesses to the wall or at least cause them significant financial problems in addition to the current trading challenges. The people who were best-placed to prevent this crisis are the bankers and their shareholders. They need to take most of the pain and count themselves fortunate they have anything left at all. As it is they are not.
The tail is wagging the dog. The dog needs to bite. If the Government is weak on this issue the dog, in essence, has no teeth.
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Banks are not supervised by FSA in the current market .FSA always talks treating customer fairly and banks are not treating customers fairly in every aspect like rate of interest charging and arrangement fee .
Banks are saying helping first time buyers example as follows.
Purchase Price of the Property £250,000 and loan to value is 85% and rate of interest charged by banks are in the average of 5.99% and base rate is 0.5% and banks marginis 5.49% apart from this £995 to £1495 arrangement fee or product fee. I hope govt. or FSA has to say is treating cutomer fairly or not . Govt. or FSA has to realize that people on tracker rate will be affected severly if interest rate go up and banks will see repossessions again.Even on remortgages LTV 75% rate of interest charging to customers are not fair even though it is secure lending .I request the govt. or FSA to address it immediately.
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Post 232. Everything you say is true. But I am amazed that anyone might think the banks would do anything different than this.
Everytime the UK banks have made a big mistake in the past they have done exactly the same thing and basically taken the poor mug UK punters for everything they can get!
I don't bank with any of the big UK High Street banks for this particulary reason. I have my mortgage with Barclays simply because they offered me a stupid deal for the periood of the mortgage. At the moment I must be costing them lot of money rather than the other way round.
The banks will continue to do this as long as we allow them to get away with it!
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Can't say I agree with everything these commentators are saying but interesting none the less!
http://www.youtube.com/watch?v=ZYcIQvSAHZ8&feature=channel
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Is this not just for publicity?
After all we have a majority shareholding in RBS and a very high % shareholding in Lloyds. We could tell them what to do...
This smacks of the government yet again governing by sound-bite and gesture
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This may be simplistic, but it seems to me, that if the banks are restricting access to reasonable credit requests at a reasonable interest rate, then the taxpayers of this country have a right to demand the immediate return of the funds made available to rescue them. Perhaps they need 'sharply' reminding that they exist because the very people they are now supposed to be helping 'Came to their Rescue'.
Just a thought "Is it possible that the suppression of credit is politically motivated? ", perhaps that is to 'Cynical', or is it!!!!
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I hope the banks are, at last, made to help the small business. In our case it may be too late. Lloyds has effectively mis-informed and mis-guided us on applying for the EFGS and having then applied for a business loan it has taken months for anything to happen - and we are still without the final funds. Their continued procrastination and inefficiency over the last few months in securing a business loan has had a severe detrimental effect not only on our business but on the lives of the people involved.
We had the belief, mistakenly it appears, that banks are supposed to be helping SMEs at this critical time but it seems they are just looking after thmselves.
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A good talking to from the head will do nothing to change the miscreants behaviour. The financial equivalent of 'six of the best" is the only way to get results.
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#235 brit_toolmaker
Thank you VERY much for that post. I'm sure it's largely correct, although Howard might have slightly overstated his case right at the end.
To me, the most interesting assertion that Husdon made, was that the annual volume of trades on Wall St was about 500 times the American GDP. (Did I Understand correctly?)
Does anyone know of any corroboration of this figure?
I'd also be interested if someone could point to equivalent statistics for the City of London. In particular, I often wonder about the ratio of the annual value of share trades to the mean value of those shares in that year, and what the commission (and stamp duty) is on these trades.
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Government to banks - lend more.
European Commission to banks - you have too much share in your markets.
This needs to be sorted fast but, as usual, it'll drag on and on.
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The one and only way of settling this issue is to simply stop using the traditional banks. We shouldn't even be thinking about how to sustain them. They need killing off and replaced with regional banks preferably run on a not for profit basis. The people really do need to take charge of this situation and not leave it to the politicians.
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Whilst we are still on the subject of RP and RP hasn't yet led on the main story of the day which is finance related see http://www.ft.com/cms/s/0/02db48fa-7a11-11de-b86f-00144feabdc0.html - I will.
Its amazing that the Government has not said anything on this matter (of any substance). Are they still in the belief that people will continue to use credit cards to desperately prop up the economy? This is the real misery story in the States and the one that's causing a lot of damage and it's just breaking here in the UK (much more so than in Europe as they're not so stupid).
The credit card companies' practice is akin to money sharks who know no bounds and hide behind 'risk profiling' which I have to say has so many holes in it you couldn't even call it Swiss cheese.
With defaults rising, credit card companies have seen fit to raise the interest so high (I'm talking Egg, Citibank, MBNA, LloydsTSB etc here) they're just pushing more and more into default (service costs are just too high thus default is chosen over repayment). It's about as irresponsible as you can get.
But the Government seems too impervious to it and SURPRISE SURPRISE it DOESN'T come under the FSA remit. WHAT A JOKE.
The defaults are seriously damaging to oeverybody's wealth how ever small (who care that is).....
Robert - are you going to lead on this story - it's right in your space.......
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Bring it on, let a free market balance it all out as soon as possible, subsidising first time buyers only stabilizes artificialy high house values and bank assets under the pretence that it will help many get into owning their own home (it will belong to borrowers only when the last payment is made, if ever.) We here in the UK have to get out of the mindset of thinking that owning ones home is better than renting one. Look at the Continent, its peoples have more freedom than we, they are for the most part not tied down to debt (the worst kind of poverty). Better just getting rid of the 'ball and chain' of bricks and mortar if you can. Governments had it in their hands to prevent the housing boom and they should have, as essential as housing is it does say a lot about many of our people, perhaps they will reep what they sow. I hope so. As for business, some may indeed flourish with better credit facilities, direct government aid too, better keeping people at work and a viable business going instead of losing it.
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For RBS-temp:
"If nothing else, a cut of one third in British living standards wouldn't even reduce them to the UK ib the 60s, let alone Portugal.
In fact, despite the recession, most people in the UK have a higher standard of living than they did a couple of years ago"
I was born in 1944 and grew up in the poverty-stricken 1950s in the North of England.
I know this sounds like the Three Yorkshire Men sketch, but - TRULY - people nowadays have no idea how affluent and how lucky they are.
Try wiping your backside on newspaper for a week and you'll get some idea of poverty.
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A Rant
from nevermore
Correspondence from the heart of darkest Birmingham
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What about Labour and Conservative plans for the Privatisation of Social Security ?
Isn't that more important ?
The Banks should stop the practice of securitising Loans and Mortgages.
Unfortunately the earnings of ordinary people are the important factor in determining when this recession/depression may end.
Sad to say whilst disposable incomes are falling so will Sales and Profits at most Businesses.
House prices too are determined by what people can afford to pay.
Though the buy fifty percent of your House and rent the rest wheeze has enabled prices to rise that bit higher. They should stop that too.
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This is just another day for a desperate government without a plan to bash the banks again.
Mandelson appears in front of the cameras and we know we're in for another load of tom foolery and spin.
There is an over capacity of businesses in the wrong sectors so it's inevitable that many will fail.
The strong and healthy companies will pick up the slack.
Ridiculous to expect banks to prop up failing businesses with taxpayers money.
Government policy is still LEND LEDND LEND SPEND SPEND SPEND.
Too late now . we're all saving like mad. So what next?
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We some of us are of course missing the era of cheap, easy-to-access credit. As an ex-banker the saddest thing about our current predicament propounded by the banks is that bankers nowadays believe their businesses are Financial Institutions, driven by their desire to make massive profits for their shareholders, themselves in the form of bonuses, and lastly to provide some form of (credible) customer service. Proprietary trading has overtaken all forms of customer-driven business to the extent that the poor old customer is largely forgotten in today's markets.
It is staggering that none of the senior members of the old RBS board possessed a recognised banking qualification. Staggering but nevertheless true. The Americanisation of the UK banking system began over 20 years ago, culminating in what we see today.
What is required is a return to 'customer-driven' business. Difficult in the current climate but to access funding businesses will need to demonstrate sound propositions, currently in a recessionary mode but to give them a chance to emerge from the mire their business propositions need to be listened to. There is a great, perhaps overwhelming case for a return to basics with local Managers in banks handling local business with local people. At the end of the day the credit-scoring systems will provide a pretty accurate but unreasoned assessment of a lending proposition. The 'canons of lending' are overidden to a degree by one solid business decision made by the guy in the locality; 'Do I trust this guy to repay me'. Such a decision cannot be made in the current climate where the more local Managers no longer exist.Continuing from my point above, there may not be many of them left now anyway - the skills are now pretty rare.
There is a sound case for deconstructing the banks as proposed by the Conservatives, but gathering the expertise together and getting out there will begin to ease the crisis - a vehicle? The Post Office springs readily to mind.
A aprting thought. There are small banks out there who will listen. Avoid the largest names if you can.
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Repairing balance sheets = blatant profiteering.
www.caledonian-comment.com
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Alistair Darling really takes the contradictions of Capitalism to the next level.
LEND MORE - he cries.
HOLD MORE CASH - he moans.
TAKE MORE RISKS TO RE-INFLATE THE ECONOMY - he wails from Number 11
DON'T TAKE THE RISKS YOU TOOK TO GET US INTO TROUBLE - drones the eyebrows of Whitehall.
The banks, left confused by these conflicting instructions revert to type and go back to making as much money from the public as they can get away with.
You cannot live your life as a contradiction and you cannot run an Economy as a contradiction.
I have spent the weekend listening to testimony from FTB's and small businesses who have made the rational decision not to buy - or not to expand - due to the Dick Turpin behaviour of the banks trying to repair their balance sheets.
...this is where the REAL recession comes from. The media and press are obsessed with the recession in the banking sector - but what they don't seem to grasp is the pain felt in banking will be felt 10 times over in the REAL recession.
Banks have the resources to juggle cash flow problems (well apart from NR, Lehmans etc.) - businesses are much less flexible - hence the reason for banks in the first place.
Banks are relying on the fact that most small and medium sized enterprises are owned by the original entrepenuer - who won't want to give up and will pay the rate demanded by the banks.
Unlike investors or limited liability companies who wil drop the business like a stone rather than stick with it through the recession.
This is the vital difference between large and small - small has a concience and large does not.
....so just remind me what happened to the 'hippies' who were warning us of corporate globalisation and it's dangers - oh yes, that's right WE IGNORED THEM.
A fool is easily spotted in the city - he's the one in a suit.
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warning to people with LLoyds TSB insurance on loans & mortgages.If you work and have signed a contract of employment for a specific time period and your contract is not renewed,your insurance claim ie.(if you are then out of work) will be null & void.Comment from my own experience.This may be the case with other companies also
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#245. noninflatable wrote:
"For RBS-temp:
I was born in 1944 and grew up in the poverty-stricken 1950s in the North of England. I know this sounds like the Three Yorkshire Men sketch, but - TRULY - people nowadays have no idea how affluent and how lucky they are. Try wiping your backside on newspaper for a week and you'll get some idea of poverty."
I'm sure. But I'm at a loss to understand why you're directing this rant at me.
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251 Writingsonthewall
I agree with much of what you say but the real problems facing business at the moment as well as falling turnover is cash flow.
A lot of companies work hard to maintain sales but the final nail in the coffin comes when some of their customers cannot pay their accounts and resulting bad debts wipe out profits.
This is the domino effect that has lead to the demise of many otherwise good companies. This is the reason banks have always been ultra cautious about lending in a recession.
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#245 I agree, compared to the 1950's we are all a lot better off. If we return there (which we will not)may I suggest using the Financial Times (water proof inks) as loo roll when the Izal runs out. It also gives one something interesting to read whilst in a fully focused mode. Indeed, perhaps loo roll manufactures can make more business out of this idea thus employ a few more workers, who knows, some may even sell (or be conned) out of their souls out of some fear for their and families future.
Now on the subject of saving and string shopping bags...........
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#248 virtualsilverlady
"Ridiculous to expect banks to prop up failing businesses with taxpayers money"
...no more ridiculous than propping up failing banks with taxpayers money.
....or propping up failing politicians / prime ministers with taxpayers money.
....or proping up failed regimes with taxpayers money (Afghanistan)
....in fact the only people not being propped up with taxpayers money is THE TAXPAYER!
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254. virtualsilverlady
Very valid comment.
This shows the Naievity of the media and all political parties who expect the recession will be a quick 'down and up' - in line with their own careers and the ethos of today where 'everything must be done quickly'.
Sadly recessions do not bend to the whims of the modern age and despite the done of mis-guided certainty coming from Downing street and the media - this will be long, slow and painful.
I was just explaining to someone at the weekend that it's very unusual for someone to loose their job (or business) and their house in the same day. Most people loose their job then it's several months (if not longer) before they loose their house - they will cling on to their home until there are no options left. In the interim period this person is merely a jobless statistic and not a housing statistic.
Sadly, all to often, people eventually become both - but try explaining this to the banks - they think it's all over because their profits are back and the FTSE is climbing!
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Here's a glimsp into the future for you all.....
says Robin Farzard, a senior writer at Business Week magazine. "There's Goldman Sachs, there's J.P. Morgan Chase - and then there's everybody else."
....soon it will be Goldman Sachs, J.P. Morgan and NOBODY ELSE.
Does nobody wonder why GS and JPM always end up on the right side of the recession? JPM survived the 1929 depression unscathed - they will put it down to good management - but I beg to differ....
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#256 It is a money go round or a trade go round, when the process slows the economy slows down, people buy less products, overcapacitated businesses wind down capacity in order to cut costs produce profits or just survive, there are lay offs etc etc, it is and adjustment a rebalancing. Everything is taxed right down to paperclips, the whole thing is about proping up the general taxpayer and taxes in general.
The question is what is the best way to do go about it? For sure anyway is to get some more momentum and confidence back into the economy (money go round) nationally and on a global scale. On a positive note 60% of the governments actions have not fed through yet, so there is some hope yet.
In the long term though we do have to change our values and make capitalism work for all in a more equitable responsible way, a system that crushes peoples lives and survival (on many levels) in lots of different ways for the profit of the few is not sustainable for what is ahead of us all. The essentials of life are not for profit nor gain.
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Demand will only rise when consumers start spending again and are prepared to borrow in order to do so.But they'll only do that when they've got some collateral to borrow against-like equity in their property.Hmmm.-but of course that's what got us in this mess in the first place.
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Mr. Peston,
As an investor in and a non-executive director of a mid-size UK manufacturing business, I can tell you from my experience that you are spot on. My company has a large manufacturing plant and has customers with orders, but we cannot get even a single pound of working capital finance in order to purchase raw materials. This in spite the company currently having a balance sheet with zero debt on it (and assets worth tens of millions of pounds). We are now looking at trade finance, which is also proving to be difficult. With the lack of working capital finance and the complete unavailability of credit insurance, the wheels of business for mid-size companies in the UK have grind to a halt. This is not about providing risky loans; this is simply about providing the oil to keep the basic machinery of business moving smoothly. Based on what I have now seen in the UK the past few months I am very skeptical about the ability of UK businesses to compete and prosper over the mid to long term. The banks, both the government-controlled and independent institutions, are doing a perfect job of killing mid-size UK businesses. What is transpiring now is going to have a major impact on the UK economy in the years to come. The banks too will suffer because a whole swathe of their customers will have simply disappeared forever from the economic landscape. Urgent action is required in the UK before it is really is too late.
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There is a relationship between volume of lending and price. The banks are currently pricing debt in order to recuperate the extraordinary losses that they've made, and help their recapitalisation. Therefore debt prices are stratospherically high - e.g., 3 mortgage fix at 300 - 400bp over base for a 60% LTV loan. Prices are high, volumes are low. Competition is not working, as there isn'[t anyone with enough scale to service the debt requirement should they price at a more normal level. Why is competition low / not working - well there used to be 4 major banks, but now there are three, supported by the current government...
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245: We are all headed back to a new kind of Poverty.
One without a Welfare State (arguably Social Security isn't much to brag about now).
One with an Ethos of Fear and Low Pay (amongst those who can get a job).
One without prospect of Retirement. (Most will be unable to pay into a Private Pension, and the State Pension will be delayed later and later)
Perhaps JL would like to do something for the British Working Classes ?
No, I thought not. The Aristocracy has to stick together after all !
Now, wheres that Mirror, I need to negotiate my Bonus for this year, one million or ten ? I can't quite decide !
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#Not all consumers are in debt nor want debt, they just want good value. There are many too who do sevice their debt easily but are feeling a tad too insecure to spend. There are also many that are in debt who have been forced to live like battery hens and are fed food concentrates in order to lay far too many eggs, so many in fact that their arse could not possibly support yet another salesman. They are the poor and the negative equity house dwellers, their slate ought to be wiped clean if seen to be victims of the melee.
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233: In respect of the Nationalised or semi nationalised Banks the Shareholders (our Pension Funds) have already lost virtually every penny.
The only people protected by the Govt intervention are the high paid City types and the people with large Bank deposits.
As in Mary Poppins whilst stand the Banks of England etc.
The American securitisation pas the Buck method is incompetent and wide open to abuse, and has brought the Banks and now considerable parts of the economy down with it.
The Illusion of Free Trade has destroyed most of Britains manufacturing through cheap imports.
The replacement of long term investment with spreadbetting is just another nail in the Coffin.
A temporary nail because as the real economy coninues to go down the Pan, Economic Shocks and crises will be more frequent and far greater in efect each time.
This will continue until exchange rates are rebalanced so that Britain can manufacture a balanced proportion of its own goods.
Britain cannot play the shell game for ever !
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Did anyone really predict this mess? I do recall one or two commentators bumping their gums about personal indebtedness but I can't recall anyone listening.
The other thing that rankles is the kind of autonomy enjoyed by the banking sector in the UK. After all, the banks' machinations impact on the lives of every citizen, so why no supervision? It seems to my untutored eye that the big names in the financial sector were much too busy devising new and ingenious scams to think any further forward than the next bonus. But surely they've got bright young things in the Treasury with bright young computer models. Why didn't they divine that the whole shebang was a product of smoke and mirrors.
Years ago I smiled indulgently at the TV screen when Gore Vidal intoned portentously, 'What's good for the banks is invariably bad for the people.' Well, that smile is now well and truly wiped from my face
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Possibly one for you thinkers out there to pick holes in...
In the late 90's it seems reasonable to say that pension funds owned a large proportion of the UK companies.
Trustees of pension funds were interested in company directors paying out regular dividends that benefitted from tax relief. In turn they would monitoring the growth a company's dividends as one (of many) indicators of future profitability.
However, the government's abolishion of ACT relief for pension funds meant that dividend income was no longer in vogue for pension fund trustees. In turn, the directors' goal of providing their shareholders secure dividend income growth waivered, as the demand was not what it once was.
What developed over the 00's was directors going hell-for-leather for all out capital growth to satisfy shareholders. Using up any spare cash to leverage a company, engage in share buybacks or invest anything that wasn't nailed down into a new project to try to generate a healthy return became the new mantra. The old days of holding comfortable reserves in cash to meet future dividends, whose payment can't be massaged by accounting magic, began to be regarded as being 'inefficient' especially since the demand was no longer there.
This is all good when the economic spiral is going up and up.... but as we have seen, when reality bites, sometimes it's better if cookie jar isn't left empty.
Some come on Gordy, give us back our tax relief and the UK will be a less volatile place!
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"Alistair Darling, Peter Mandelson, Shriti Vadera and Paul Myners will grill the bosses of Royal Bank of Scotland, Lloyds, Barclays, HSBC, Santander and Nationwide about whether they are lending enough to support an economic recovery - and, in the case of Royal Bank of Scotland and Lloyds, whether they are lending what they promised when kept alive by a massive injection of public funds"
The econbomic recovery of what?
The thing is: a) the banks are effectively international, b) the message gven out in recent years has been 'it's all global now', and c) the banks get money wherever they can, be it 'wholesale markets' or 'gullible governments/people_where_they_are_located_for_business_convenience'.
The basic point one has to grasp is that they are in business for their international shareholders, not for the geographical country which they are physically based in. They are only interested in that as a source of business and as a ready source of liquidity if they can get it. The point is that these are not 'British' banks, they are not nationalised as has been made very clear since the bailout. To treat them as if they are is naive. Why should they care about British business if it's not in their financial interests? They may be lending, but that bailout money might be being loaned to Bangladesh, Columbia, Russia, who knows where else, wherever there are profitable markets that the British taxpayers' money here might be loaned out to? If that is not the case, by all means explains why it is not (yes I know there is suppose dto be an agency overlooking the UK's interests - it's another FSA sinecure is it not?).
This is surely the true face of of 'venal' global capitalism is it not? 'Britain' doesn't exist except as an investment market, and what is there to invest in in the UK? Isn't that the question?
Enough of this nationalism already. ;-)
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259 Paul4u
I don't disagree with anything you say except this bit...
"In the long term though we do have to change our values and make capitalism work for all in a more equitable responsible way"
I don't believe the system can be adjusted or tinkered with to make it work without the failings you describe. The inherent naure of competitive markets always leads to overproduction and destruction of capital. How many times are we going to see it fail (and it's consequences) before we look for an alternative?
Surely an seeking alternative system should be the governmnents priority?
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268. JadedJean
Interesting insight and I fear correct. Look how banks were prepared to invest in areas such as aparthied south Africa, or some of the less 'free and honest' states.
Do they ever listen to Governments that frown on their decisions?
See how they freely move capital around the world but the labour is not allowed to freely follow it.
We are mere puppets on their strings dancing to the tune they choose...
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supercalmdown
You are on form today!
Quite right and well put!
Sasha
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It's not just small business's, Millions of Britains are suffering from poor credit ratings, many as a direct result of the economic down turn. It appears that large banking institutions have made high risk, poor decisions without penalty, which will impact on normal run of the mill hard working tax payers and business's for years and probably decades. Yet small Business's and individuals who default on a payments, many who have had to lay staff off or lost there jobs, in the worst cases lost there company or had there properties repossessed, pay the penalty of having adverse statements on there credit files for up to 6 years, not to mention the distress and heart ache of losing Jobs and homes.
If this government is serious about kick starting the economy, the statutory period for all defaults should be reduced to 3 years. This would help those who have been unfortunate enough to be affected, allowing them to re-establish themselves on the financial ladder sooner, whilst upholding a penalty for irresponsible borrowing. Its a double edged sword that needs to be proportionate, irresponsible borrowing is proceeded by irresponsible lending.
Its high time this government acknowledged that fact, by providing some relief to the businesses and individuals.
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#272. CALLAN1959 wrote:
"Millions of Britains are suffering from poor credit ratings, many as a direct result of the economic down turn."
No, if they are in that situation is is probably because they borrowed more than they could afford to repay. Whatever happened to people taking responsibility for their own actions?
"If this government is serious about kick starting the economy, the statutory period for all defaults should be reduced to 3 years. This would help those who have been unfortunate enough to be affected, allowing them to re-establish themselves on the financial ladder sooner..."
Why should those who have over-borrowed be permitted to wipe the slate clean and re-establish themselves so easily? What about the institutions they owe money to? Isn't bad debt the very reason why the financial world came crashing down?
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273. At 11:32pm on 27 Jul 2009, rbs_temp wrote:
"No, if they are in that situation is is probably because they borrowed more than they could afford to repay. Whatever happened to people taking responsibility for their own actions?"
True, but what about the exceptions? What about those who were conned by an over-zealous mortgage salesman - or stepped payment schemes which weren't explained properly - I suppose that's all down to those people too? These schemes were sanctioned by the industry - even though they were designed to hook customers in.
....and what about the banks themselves? Did they not borrow and lend money without doing 'due dilligence'? However it's OK for them to be saved by the Government? - even though in this case they are working in their own field of expertise.
When you take your car to the mechanic you are not expected to be a motor vehicle expert so you can verify what you are told is true - so why is it acceptable for mortgage salesmen not to reveal the full picture when selling a mortgage?
Just because you are an expert in finance and won't get caught out in this way because of your knowledge - it's not the same for everyone and nor should it be.
It's called trust.
Although my finances are fine - it's not too difficult to see the other side of the story and it's not a black and white picture of those who borrowed being careless.
To take up that view is simply selfish.
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The increase in margins is inevitable for two reasons.
Firstly, even though the BoE base rate has fallen the inter-bank lending rate still remains substantially higher meaning the cost of borrowing the money to lend to the SME market is higher than the 0.5% banded about by the treasury. Alistair Darling knows this full well and stating otherwise is irresponsible.
Secondly, and perhaps more importantly when trying to understand the banks reasoning, is a simple risk/reward calculation. If, in the boom times of 2005-2007 a bank lends 100 people £100 each at 1% above their borrowing rate they would make £100 profit assuming all 100 people pay that money back. However, if one of those people goes bust or is unable to repay the money that £100 is lost and the bank makes zero profit on the risk of lending £10,000. Now the risk of default is much higher and so the chances are that in this case maybe 3-4 people do not pay their £100 back. In this case the bank loses £200-£300 on the deals. By increasing the margin they make more money to mitigate these potential losses. The banks are merely pricing to reflect the increased risk.
It is true that some businesses are less likely to default than others and that is where proper analysis of risk is required. If Alistair Darling insists on the banks forgoing this analysis and increasing lending to any Tom, Dick or Harry this will only result in further increase in margins to combat the increase in risk of default.
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#269
If the profits gained from using a Capitalist model were based upon different values, universally recognised higher humane values, then perhaps it may work. Capitalism needs rebranding. Success will still be sweet for those who do well and see themselves as Alpha types, the accolades they recieve will still stir them up inside with feelings of being somebody, the difference being that if they play the capitalist game in a responsible humane way and succeed they may actually deserve the rewards/social for the most part. Some writing on stone perhaps is needed
It would take a bloody revolution/a calamity to change our capitalist system with another non capitalist one, those at the top would not move nor allow it anyway. It makes more sense to me that what is needed is not a tweak but a good push into a view that all of us are all inter dependant on one another (global) and as such our ultimate aims ought to be mutual and equitable, rewards being respect where it is due and not the vulgarity we apparently respect today. There is no great pleasure in getting one over on somebody nor on peoples/nations around the world.
Idealistic?, yes, workable? we may have no choice soon so we had better get some new solutions going soon, the old ones do not work very well.
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This is my first ever blog comment and comes as a result of my experience over the past few months with my bank. I hear all the rhetoric going on about the banks, and then chat about what AD is trying to do to warn them.. and then they leave the room after speaking with him and say ' that'll be right'.. well for me a small business, who has 1. met with my bank to renew facilities 2. produced all the doumentation and evidence as requested 3. Produced a realistic recovery plan 4. Obtained an extension to December 2009 and mmore importantly have produced to the recovery plan over the past 3 months.. here is what is happening mr Darling and happy to be interviewed as a business case. I have had my facility agreed, yes great you cry! tHE FEE FOR ARRANGING IT IS 'INCREASED'. tHE RATE OF INTEREST BEING PAID IS 'UP' TO BASE PLUS 4.5 POINTS.. THIS IS MORE THAN DOUBLE WHAT I HAD AGREED PREVIOUSLY..ridiculous we cry... and this week i am running around like a headless chicken trying to organise projects, excitied at the prospect of getting out of the current situation.. to get a call around 3 pm in the middle of my turmoil to say... from my 'relationship manager' ..silly phrase as this does not describe it as I no longer have a relationship with my bank (they think they have) ..saying 'hi etc all the niceites.. then the crunch line!! I have recieved a memo from credit who want you to reduce the amount of borrowing by 25k by December 2009. What a great feeling I had to know that the ifrst new project I managed to secure will go to their balance sheet and reduce their risk to business. What a joke... what was given to me was a lifebelt attached to a pair of lead boots!! I have had it, honestly.. I have never felt so so downtrodden.. and having managed and run a successsful business for 14 years.. I have reached the end of my personal end with my banks and politics, and economy, and and and and.. anyway its Wednesday morning, I have to go now and see if I can earn some fees in order to hand them to my bank at the end of the year, alonside telling my wife she will need to learn to play the guitar and go and sing in the shopping mall. BBC, get the pressure on the situation, we businesses can do it with support and help... support us, not hinder us, we are being open with you, banks, so get to grips and stop punishing me for making your wrong decisions...like RBS securing a 'flase ruby' as an asset .. what a joke!! Hope this means something to someone...Rus
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we are a small manufacturing company in the north. RBS have squeezed and squeezed us to the point of us closing the doors and putting 17 people out of work. Thanks to you RBS who are one of the reasons we are in a mess anyway
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