Since the economic crash three years ago commentators and economists have lined up gleefully to take part in a new national sport ‘bash the banker’.
I have often felt that, other than the relatively few within the banking industry who appeared to be making investments with all the care with which Charlie Sheen places a bet on a roulette wheel, banks generally were being somewhat unfairly targeted. In particular, it seemed somewhat ironic to me that on the one hand they were being chastised for lending too much cash to too many risky ventures, whilst at the same time being criticised for not lending enough money to the business community.
I argued at the time that the banks would need to replenish their balances before we could hope to see any return to near normality as far as lending was concerned. I also expressed the fear that we may ‘throw the baby out with the bath water’ when it came to new governance arrangements around bank lending, and that our financial institutions would become too ‘risk averse’.
Figures produced this week would appear to sadly prove those fears to have been accurate. Bank lending is continuing to weaken. SME lending has shrunk by an annual rate of some 6%. Despite Project Merlin, politicians insisting that banks must lend more, and banks telling us continually that they are ‘open for business’, the statistical evidence suggests that ‘risk averse’ ought to be the strap line for many of our once investment friendly, some would say, cavalier, banks.
Banks object and suggest that the demand from small business simply isn’t there. My experience, however, is that SME’s are fearful of expressing the ambition to grow and seeking bank support due to the distinct possibility of their existing facilities being reviewed and their bank charges being significantly hiked.
In the housing market too, things continue to stagnate as mortgage availability is running at barely a third of pre recession levels and that continues to negatively impact on building, construction – and general confidence.
As the government contemplates another set of extremely disappointing growth figures (there is even some talk of a return to recession before the year- end), the Chancellor must surely begin to take this lack of banking activity seriously. He could try giving the banks a public kicking again. Alternatively, he could begin to introduce more access to finance initiatives for the SME community. Those that currently exist are poorly marketed and tend to have a reputation, perhaps unfairly, of being overly bureaucratic and too inflexible and sector specific.
Nonetheless, whatever new initiatives do or do not come to light, for the foreseeable future banks will be seen as the most legitimate financial institutions from which a business raises finance. After a long period of stagnation, it is time for them to start to be a little more ambitious, a little less greedy – and a lot more honest. If you’re open for business Mr Banker, then SHOW ME THE MONEY!