Renewed assault: Sir Mervyn King has berated Britain’s banks for failing to lend to small businesses
Sir Mervyn King, Governor of the Bank of England, this week renewed his assault on Britain’s banks, for failing to provide the lending to small businesses which is indispensable to their growth, and often survival.
New figures show that last year net lending fell by almost £11?billion. This was in defiance of promises made by the institutions’ bosses under the so-called Project Merlin deal, to increase funding for companies.
Meanwhile, the Office Of Fair Trading has called on banks to change their working practices, to simplify the jumble of numbers with which they muddle us, so that customers can make a clear calculation about whether they would be better off changing financial services providers.
In addition, though their bonuses have fallen from stupendous to merely disgusting, bankers are still giving themselves rewards for their own services out of all proportion to their usefulness to society or their shareholders.
I recently read a pundit’s appeal for an outbreak of truth and reconciliation in the on-going war between the City and the public. The writer argued that, after all the abuse we have heaped on bankers, it is time to call a halt, recognise their importance to the economy and let them get on with their jobs.
My answer to that, and probably yours, would be: time enough for reconciliation when these people stop robbing us blind and mend their ways. As long as they carry on exactly as before, there is not the smallest reason to stop kicking them.
I have sometimes made mention in the Mail about my own tribulations at the hands of the financial services industry. I now have a nice new grievance.
On January 31, an endowment policy matured. Like everybody’s holdings of this kind, mine would deliver only around 60 per cent of the ‘target figure’ that the crooks who sold it to me promised two decades ago. Indeed, I stand to get little more than the paper amount I have paid in since 1992.
I signed all the maturity forms back in December and had them duly witnessed. It turns out that the provider, Barclays Life, has been sold to another firm called
This week, I telephoned them to ask where my money was. After a few minutes, I was told: ‘We’ve just got the paperwork back from Barclays. We’ll be dealing with ittoday.’
So I would get the cash immediately? ‘No, that will take three to five working days.’
Backwards step: New figures show that last year net lending fell by almost £11¿billion
Unacceptable: Bankers are still giving themselves rewards for their own services which are disproportionate to their usefulness to their shareholders
I hit the roof. This is how the financial services industry gets rich. By the time I receive the miserable wreck of my endowment money, ReAssure will have had use of it for more than a fortnight past the due date.
I warned the company it would be reading about itself in print, which prompted an automated response letter: ‘Your complaint is important to us and will be fully investigated by one of our complaint handlers.’
Now, I will admit that my solvency is not threatened by ReAssure’s tardiness and Barclays Life’s miserable performance. But for lots of people, much less equipped than I am to extract revenge, such payments are of vital importance. These institutions are brutes run by brutes, each one as bad as the other.
My second barrel at the bankers derives from an experience a month ago.
One of the most notorious bank bosses, a man whose remuneration is delivered in an armoured truck, invited me to lunch. Stupidly, I thought he wished to confess the error of his ways. I could not have been more wrong.
‘I am becoming extremely concerned, Max — you don’t mind if I call you Max?’ he began with headmasterly gravity, ‘that Britain is turning against capitalism and the payment of appropriate rewards.’
I said: ‘You mean you think people like me are unjust in criticising your remuneration?’ Yes, he answered, saying my denunciations upset his children when they read them.
I told him that a few days earlier I had met an industrialist — one of the really good ones — and told him I was booked to lunch with this particular banker. ‘Ask him,’ responded the industrialist, ‘how he can conceivably justify his obscene display of personal greed.’
My banker host refused to give up. ‘I ask you this, Max,’ he demanded, ‘do you or do you not believe Britain needs a healthy and vigorous financial services industry? Would Britain be a better place if we take this bank to New York?’
I replied that I was sure that Mervyn King does not think anyone should be frightened by such a threat, which my host has often made before.
I added: ‘Are you suggesting we have only one choice: to clap prettily as you collect untold millions every year, or watch you take the bank somewhere else in a huff?’
The banker batted stubbornly back: ‘Are you against paying people the going rate for what they do?’
I gave serial answers: first, almost no one criticises entrepreneurs who make fortunes by taking personal risk. Instead, our spleen focuses on privileged employees who play with company money, not their own, and who pay themselves grotesque sums for doing so.
Request: The Office Of Fair Trading has called on banks to change their working practices and to simplify the jumble of numbers which are surely used to muddle us
Second, had he not noticed what is happening in the real world? Everybody else is getting hammered. The European financial system is hanging by a thread. We are entering what looks like a long period of austerity. Unless bankers want the peasants storming their Winter Palaces, is it not prudent to be seen to curb their appetites?
Finally, in addition to screwing their customers, bank bosses have ravaged shareholder value. My friends who understand these things say that the banks’ balance sheets are not worth the paper they are written on, because no one knows the real value of their declared assets. They are scarcely presiding over success.
My host said portentously that since he signs off his bank’s accounts, he is sure they accurately depict their condition. He travels the country meeting clients and customers, and he claims to find them pretty happy, too.
He himself is an entrepreneur: he has built a terrific investment business at the bank and created lots of jobs. He and his team deserve to be properly rewarded.
Unless bankers want the peasants storming their Winter Palaces, is it not prudent to be seen to curb their appetites?
I left our lunch bewildered that my host should have chosen to waste 75 minutes of his valuable time to tell me that he regrets nothing, and give me a dressing-down for casting aspersions on the proper workings of the capitalist system.
‘When I voluntarily waived my bonus for two years, nobody gave me any credit,’ he said crossly. He and his kind — for there are many more like him out there — inhabit a land so remote from the rest of us that no United Nations interpreter could bridge the communications gap.
I see no hope of a reconciliation between bankers and the balance of mankind unless — or until — they suffer a shock, a divine thunderbolt, a revelation of a severity which will make St Paul’s experience in transit to Damascus look like amateur stuff.
These vastly pampered moguls really believe they are worth the money, and cannot comprehend why most of the rest of us so passionately hold them in contempt.
The answer is that we must keep kicking until they get the message, and the Governor of the Bank of England obviously thinks so, too.
Here’s what other readers have said. Why not add your thoughts, or debate this issue live on our message boards.
The comments below have not been moderated.
I deal with one of the UK high street banks in other countries on a fairly regular basis and I have to say that the service they provide is very good. So I guess it comes down to the banking regulation in individual countries that prevents them from running amok elsewhere. So there you have it, if they are allowed to then they will.
– keith, brisbane, 17/2/2012 22:25
“our banks are brutish institutions run by brutes”. Ever thought why? How many new UK banks have started in the last 10 years? Its a very short list for a reason.
Its a hard highly regulated, high risk, high reward and competitive business. Hence brutes are required to run them.
– DD, Basingstoke, Hants, 17/2/2012 21:37
However true your article is seen by most of us, it is patently not so among the denizens of self importance and since they hold the whip hand, regardless of the views of government and its diplomacy by people who can afford to wait until the furore has died down before carrying on where they left off. The banking system is a beast that will not be tamed. Like arms salesmen, they will do whatever it takes, on the grounds that if they don’t someone else will. The big boys don’t exactly seem to be quivering in their boots at the breech loaders – they know that no one will pull the cord – to many entwined vested interests. In any event, when push comes to shove, the old school tie covert conspirators will let their equally avaricious lobbyists, another mob Mr. Cameron ‘U’ turned on, off the leash. Plus cachange…
– r. bowie, neath, s.wales, 17/2/2012 20:12
These Masters of the Universe certainly remind me of ancien regime France before the Revolution. Monarch & aristos closeted in cloud cuckoo Versailles-land, paying no taxes & abusing their power & privilege to create an ever bigger gulf between themselves and the toilers who supported them. Enormous state debt prompts moderate reform proposals to tax nobles. Nobles object .Weak king gives in & sacks reforming ministers. Nobles pay high price as Revolution unfolds. Is Cameron Louis XVI?
Lots of fine-sounding rhetoric about unacceptable bonuses, but when it comes to European proposals to tax the financial sector, he plays the national card. NOT TAXING bankers is in our national interest. NOT TAXING nobles is in Louis XVI’s interest. Who benefits? Answer: bankers and nobles, at least in the short run. With Fred Goodwin have we reached a Marie Antoinette moment – a lightning rod for all our hatred of the bankers? Revolutions are a sign that political elites have failed to reform in time.
– mv, west midlands uk, 17/2/2012 19:45
The Prime Minister vetoed the EU summit in december saying it would badly hit the City of London. Maybe he is looking for a job there whedn he gets kicked out of 10 Downing Street
– Kenneth Keane, Apremont Vendee France, 17/2/2012 19:40
The banks should be supporting the economy not the economy supporting the banks.
– martin, kent, 17/2/2012 18:51
Great article Max. If I ever met your banking chum, I would tell him the following: A Bank manager invites a small businessman into his office. The bank manager
looks the businessman in the eyes & says “Look, you have had a loan with us for years. We know that the current economic climate is dire. We as a bank know that without us granting you this loan your business would not exist. We also know that you have not made a profit for some time…However, to recognise the fact that you are the only person on this planet who can lead your business, & to take into account the untold personal sacrifices that you have had to make as a person managing your business…please pay yourself a bonus equivalent to 150% of your salary each year from now on, Oh & forget the effect that this will have to your balance sheet”. The historic day that this event takes place will be the day that banks have ONE small businessman stop criticising bankers obscene display of personal greed & remuneration.
– Why…?, Oh Why…?, 17/2/2012 18:07
The delay in getting your money reminds me of the 5 working day time still needed, even in this electronic age, to clear cheques. It is a racket and disgrace that when you present a cheque, which is then immediately put through a character reading machine and has the amount keyed in, that it STILL has to take 5 working days to ‘get the money’ from the drawer’s account. What happens to the money during this time? And all this time the bank charges you interest and fees (if applicable) on any overdrawn amount. “Oh it hasn’t been cleared yet” is the response. Oh yeah?
– CDA, Alsager, Cheshire, 17/2/2012 17:17
Yea John Tate,I can just hear it from an insurance salesman,”of course this policy in x years may not be worth the money you have put into it”,it’s rubbish,it was based on the rate being around 8.5,sure there were 50 reams of paper to go through with various rates but I bet nobody did,that’s why they were framed that way. Any salesman telling potential customers that they could quite easily lose their savings would have been out the door within a week,and you know it.
– michael savell, brittany,france, 17/2/2012 17:12
He then made a conscious decision to go ahead with the investment against other types that would have been in the marketplace. Nothing is guaranteed!! – John Tate,
Bristol, 17/2/2012 13:47 ####…and you, as an ‘insider’ totally miss the point, or are being deliberately obtuse. The results, or final pay out if you will, were totally in the hands of those offering the product, not market forces. They are in the position of being able to influence things, by moving money around and paying themselves huge dividends to the extent that the funds in question generate little if any interest, just sufficient to keep on going, then blaming poor market performance for the poor results. Lawyers and bankers are of the same mould – parasites.
– Sick and tired of the lot of ’em, Essex, 17/2/2012 16:29
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Try this using the English debt level as a reason to ‘redistribute’ wealth via ‘requisitions’ of wealth from the wealthiest. ‘Requisition’ ALL that wealth of the riches but 20 million of the top 1% of England’s citizens – that should cover everything. Even 20 million is an unthinkable sum to the 99%, but given that some of these people are worth near billions, you’d imagine how up in arms these 1% types would about having ONLY 20 million. The 99% cannot even imagine having 2 million, so either the Plutocracy Bastille gets torn down with the government alongside them, or the confiscation by the government occurs. Capitalism with socialist limits is the only wy to distribute weakth and prevent extrem sequestration of financial resources. When debt is killing England, the 99% should not have to pay the bills and the 1% who live in extreme luxury with massive sequestered funds not put to any use or to help alleviate interest levels by removal of debt, should have a sense of patriotism to give up that wealth to clear England’s debt instead of selfishly running off with the money to tax havens or keeping silent while the country gets deeper in debt – the citizens make up the country so if the country is going down, it is ubconscionable for the 1% to sit still and then migrate when the country falls apart. In that case the government might as well confiscate those extyreme funds since the citizen has no interest in the country anyway and would watch the country fall like an ENEMY, not helping out.