Maybe not top of your current affairs reading, maybe not even top half. For most people, business owners included it probably falls into ‘the last thing I want to read’, but it actually is quite important.
Over the last few year we have become accustomed to bank bailouts. Add to that, banker bonuses, bad debts, lack of lending, and generally the media think that bankers are a pretty bad bunch.
As a former banker, please forgive me my sins…
Banking Regulation – Is It A Bad Thing?
For most of us, having banks that are solid, profitable and lending is a good thing. OK, we don’t like to see banks making big profits, but there was always a positive side.
Think about this –
Banks making profits = banks that are lending
Banks seeing bad debts = banks that are lending
A bank manager that could make a decision = less regulation of banks
A bank supporting my business = the need to make local decisions
Local decisions = cannot do with present or more regulation
Does regulation actually benefit you and me? Well it does serve a purpose in that it ensures lending is properly structured and risk is properly measured.
But does that help you, the business owner? It probably works against you.
The government want banks to have stronger balance sheets. This means less doubtful debt and more secured borrowing (we are being simplistic, but this is a blog not the FT). In turn this means if you cannot tick all the boxes then you don’t stand much of a chance.
I also talk to a lot of business owners. The most common thread about banks is the old saying of ‘I remember when my manager could actually make a decision…’. Well that has well and truly been regulated out.
So as a business owner, what is it you want from your bank? Is it a bank that will support you, or a stable and risk averse company? I know which one present and planned regulation is moving toward.
Which makes you wonder… Why do we have successive governments promoting both stronger regulation and more lending? I don’t think the two actually work together, Messrs Cable and Osborne, please note…
Any comments about this article then please add them above, or contact Lime via the website, they would love to hear from you
By David Farmer