Stephen Hester, Banks and SMEs

Stephen Hester, Banks and SMEs

Posted on 19/03/2013 by Phil Hall


When I heard Stephen Hester would be on the Today programme this morning I was ready to hurl abuse at the radio, but surprisingly, I thought that he acquitted himself well. Not so when he addressed the CBI Dinner in Liverpool two years ago, when he gave a less than confident performance, offered no apology and said nothing to endear himself to any of us in the room. Rarely have I heard such naughty words used at such a gathering.

He is not the first man to have to handle a broken banking system and I doubt he will be the last. It has been said that bankers have had an image problem since medieval times. Sometime last year I read a remarkable article about how the modern day banking system was ‘invented’ by the Italians – and that the deposit account, double-entry book keeping, the letter of credit and the words “bank”, “bankrupt” and “risk” are all Italian in origin.

History is full of narratives of how bankers have been ruined by lending to various monarchs, especially the English, who reneged on their debts. The bankers brought this upon themselves believing that they were inviolable and could control these dodgy geezers. To be fair to the financial whiz kids, when things go well everyone jumps on the band wagon. Remember Lloyds in the ‘80s?

Everyone loves a winner and will forgive while the gravy train rolls. Perception is all, which is why confidence and hubris will often win the day. I can recall many business brilliant deals that were won on the weakest hand because of sheer brass neck. Fred Goodwin, no Sir he, certainly has a lot to answer for but no doubt he can still pay the mortgage, and go on holiday while, as a consequence of his hubris, many a small, (and large) business has gone to the wall ruining lives and putting people out of work. So Goodwin was no different it’s just the numbers that were bigger.

What really offends me is the way the banks operate when dealing with small businesses. There are many companies I know of where, regardless of an impeccable track record over many years, never missing a payment, strict adherence to rapacious and usurious terms, when things got a bit tough and they needed help the bank was nowhere to be seen. Furthermore with any decision that was taken there was absolutely no right of appeal.

Thirty years ago I was running pubs, no credit cards then, and I knew my bank manager(s) and my account was one of the biggest in the branch. I banked cash, I had cash and they were forever offering me loans that I neither wanted nor needed. Fast forward to this century and getting any sort of facility is, and has been, like trying to get blood out of a stone.  Over the years I have met and had dealings with many bankers and watched them at play, in the usual places, the box, the car park, Ascot Twickenham, Premiere League et al. Of the many that I have come into contact with I have yet to meet one who has been in business. None of them has the slightest idea or understanding of what it is like to run a business of any size.  What they did in common have was an over inflated idea of their own importance but no real authority; the final decisions being made by the bean counters whose faces you never see. The banks can squander millions/billions on huge projects, incur vast losses on unsound investments and conveniently forget that 80% of UK GDP is generated by SMEs.

So as much as I have reappraised my opinion about Stephen Hester who, handed a poisoned chalice, is working hard to resurrect RBS I have yet to change my opinion about the managers at the local level.

As for modern day Italian bankers…watch their space!

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