Good news for the governor: a groundswell of responses to the era of bad banking
‘Of all the many ways of organising banking,’ declared the Governor of the Bank of England this week, ‘the worst is the one we have today.’ That spurred me to continue my search for ‘relationship banking’ — and the latest batch of readers’ nominations suggest, encouragingly, that unreformed practitioners still survive even within our shamed and bailed-out mega-banks. Julie Clark of NatWest in Yeovil represents ‘a return to the days of kindness, courtesy and great competence’; for Marc Roxby of Lloyds in Guernsey, ‘nothing is difficult’; as for Barry White — not the late, great soul singer, though many ladies no doubt dreamed of opening an account with him, but a London executive of Royal Bank of Scotland: ‘Quite strict, not profligate with the bank’s money, but he does make the time to listen to what we have to say about our business and act accordingly.’ Another correspondent praises the entire staff of Adam & Co, an RBS offshoot in St James’s: ‘I can walk in and be greeted by name, withdraw cash without ID and summon an account adviser without appointment for special requests or simply to say good morning.’ What more could you ask? That’s enough free plugs for the time being — but a worthwhile exercise, I hope you’ll agree, because it has illuminated how bank customers would like to be treated, but so rarely are.
My findings may help refine the plans of the new breed of retail banks I wrote about here in July, including the one whose promoter Lord Levene said he aims to ‘bring back Captain Mainwaring’, the epitome of old-style relationship banking. And if you’ve given up hope that any bank, new or old, will treat you right, you can now cut them out altogether. An intriguing development of e-commerce is ‘social lending’ (or if you must, ‘peer-to-peer lending’, which abbreviates to P2P — but dontcha just hate acronyms that have numbers in the middle?). This amalgam of social networking and eBay-style price-setting has generated a market for savers willing to risk direct lending in order to earn better returns and cold-shoulder the banks as they do so. The pioneer, Zopa, has matched £100 million of loans in its first five years under the brilliant slogan ‘everybody wins except the fat cats’, giving lenders an average net return over the last year of 8.2 per cent before bad debts — which, apart from loans made in the period immediately before the credit crunch, seem to have been modest. Among newer players, Yes-secure and Quakle provide mechanisms for collective lending to friends and relations; Funding Circle raises loans for small businesses; and the latest entrant, RateSetter, adds flexibility by allowing shorter-term deals on both sides.
It’s all small-scale and a bit wacky — Zopa borrowers cite purposes such as ‘buying Newcastle United season tickets’ and ‘getting divorced’ — but alongside the Bring Back Captain Mainwaring movement and the findings of my own search party, it’s part of a welcome groundswell of response to the era of bad banking that went before.
Time to hear from Red Len
David Cameron, meanwhile, was promising the CBI conference ‘a banking sector that is really focused on small business lending’. If government could make that happen by fiat, however, it would already have done so — but it can’t. In a free-market economy, government’s role is to engender stability through intelligent regulation, keep inflation in check, provide decent infrastructure, promote science and skills, but otherwise keep out of the way of business, which will find the finance it needs when macro conditions are right. There was plenty of sensible talk about all that at the CBI, and it was good to see the agenda move forward from last week’s hand-wringing over public-sector job cuts to this week’s focus on how private-sector growth will create new jobs. Perhaps George Osborne’s spending review speech was timed just ahead of the CBI for precisely that reason — and it’s a pity the TUC (which met in mid-September) does not come right at the end of the annual conference timetable. A blood-curdling call for a general strike from ‘Red Len’ McClusky — heir to the throne of Unite, godfather of the BA cabin crew dispute and all-round Seventies throwback — would have been just the closing speech we needed in this month’s national debate to remind us of the nation we never want to be again.
Not for profit
Poor old Will Hutton received a magisterial pasting from Simon Heffer in our Books pages a couple of weeks ago. I haven’t found time yet to dip into Hutton’s latest diatribe on the unfairness of modern capitalism, Them and Us: Politics, Greed and Inequality, to see whether Heffer’s hilarious review was fair — but it certainly chimed with my own review of an earlier sermon by the same author, The Stakeholding Society (1998), which I see I described as having ‘sunk under the weight of its own verbose impracticality’. And there is cruel irony in the fact that the publication of yet another ponderous tome about how financiers and companies should conduct themselves has coincided with the collapse of the centre-left guru’s only known attempt to run a business, albeit an appropriately not-for-profit one.
The Work Foundation think-tank, of which he is executive vice-chairman and former chief executive — and which used to be a rather admirable outfit called the Industrial Society before it became the bandwagon of Huttonism — has been pushed into insolvency by a £27 million pension deficit. Its creditors now face what the FT calls ‘an unspecified shortfall’, although the Foundation itself has been bought by Lancaster University. Displaying his mastery of the forecasting spreadsheet, Hutton himself declared that ‘two and two will make five’ as a result of this new link-up, though one can only wonder how long it will be before funding cuts force Lancaster to conclude that two and two might only make three-and-a-half. Good business begins at home, as it were, and the first rule is not to go bust.
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