Yesterday, I reblogged an important article by OECD, which highlighted ‘sustainable bank lending’ as a barrier to growth. I added my usual ‘two cents’ and received an immediate reply from Martin Augier, which is re-published below. Martin and I were colleagues together at American Express in the mid-seventies. I value Martin’s judgement and insight, especially on this subject because of his career in financial services. These days, he’s arguing the case of the typical SME:
The Banks in the UK a little worse than useless. They really do not have too much competition and as a result generally offer similar products. As for lending criterion, they have managed to put together requirements which require for many property development loans, A debenture; 1st Charge on a property; A Valuation from their appointed valuer at my expense; A monitoring surveyor in the case of building project costing thousands of pounds, a fee to enter into the transaction and a fee to exit the transaction; a personal guarantee and as far as I can tell a mortgage over my wife, children and grandchildren!
The sooner we get some competition the better however I am not holding my breath as the regulatory requirements of the FCA together with the Capital restrictions from The Bank of England make life for any new entrant almost impossible.
I find it amazing that in many cases the bonus’ paid at year end are well in excess of the dividends paid to the shareholders and seem to bear no relation to the level of skill and risk involved.