Pressure on the Banks

It remains interesting yet frustrating to observe the current debate about the role of the Banks and the pressure that is being put upon them to lend.

It was refreshing to read an article earlier this week in which a 'journalist' admitted that sometimes the right answer is NO - as I have said in a previous blog.

In my view the Government continues to find ways to divert attention from its disastrous handling of the economy. There comes a time when a bank manager has to call time on his client - this is when cash flow dries up and there is little chance in the medium term that it can be expected to recover. At that point it is the right decision to help a client find a way out and limit damage to both the shareholders and the bank.

As an ex-banker I am not here to defend the banks in all cases - they do need to be much more professional in the way that their Managers interact with their customers. Managers who have never experienced a downturn - and that will bethe majority - have to be helped to identify those relationships which can be helped through the recession.

Generally, it will bethe customers who seek help and talk to their Managers who have the best chance of surviving. However, one fear I have is that decisions and judgements will be made by the banks on an 'industry basis'. I have seen banks withdraw form one sector after another because they have experienced a 'bad debt or debts' in that sector - i.e. they tar everone with the same brush!!

In this recession the Banks need to be much more creative and recognise that there will be winners and losers in every sector of the economy. The key will be to identify the management teams that have the skill and tenacity to pull through - with a little help from their friends. This wil take time - and I am afraid time is short for toomany Bank Managers who often have ten's if not hundreds of small businesses to manage.

To my point - if the Prime Minister wants to help he should be focussing his attention on encouraging the Banks to find ways to educate and train their inexperienced Managers to understand their customers and know when to be bold - they need to be bold enough to say no and bold enough to say yes when that is the right decision - fight the Credit men in back office when necessary. In both scenarios the Bank Manager should not simply abandon their client to their fate.

The Bank should be a friend in adversity as well as in the good times. Don't take the easy option and remove the umbrella as soon as it starts raining.