UK: Why we MUST be Outraged & Why Those Banks, Who Would Steal the Bailout, Mustn’t be Allowed to Kill the Fintech Competition

Why we may not be surprised but we must be outraged!

The banks are a danger to our society – and, according to the BIS (the Centralbank’s Central Bank)  an unnecessary one at that.

The UK government has over the last two weeks taken unprecedented measures for the right reasons – to protect businesses and jobs. Their chosen vehicle has, perhaps understandably, been the banks. I have the privilege to have the ear of various CEOs, and they mine, in both the traditional and fintech sectors and have watched with something approaching incredulity the attitude being displayed by the traditional banks both to the crisis itself and the government’s attempts to bring support and help to other businesses. Their attempts to hijack it which came close to following it out.

Frankly what I have seen has appalled me: A kind of crowing attitude seeing that they see themselves as now in the driving seat and able to pronounce on other businesses. Plus an attempt to use the crisis to squeeze out the competition from fintech..

Breaking The Government’s Promises

When the Chancellor announced the package of measures for employers it was seen for what it was intended to be: Generous. By the time it reached the streets it had become something entirely different – an opportunity for profiteering, in various forms.

Despite the fact the government are providing the money, and guarantees, they privately made it clear it’s only the businesses they see as profitable for them post-Corona that would be helped. Then when business came to apply for the loans the banks insisted on personal guarantees. This is rather like asking your customers to double insure the bank when it is they not the bank that is at risk. It hollows out the help to a mere shell making it totally ineffective. As does the other tactic adopted: demanding fully costed and watertight business plans in the current crisis!

“Our bank asking for a proposal and business plan plus meet serviceability criteria. Can someone lift their head from under their desk in Canary Wharf and look out the window! Business plan – serviceability!! The government with all its resources has no idea when this will end – how on earth is an SME to prepare a plan that isn’t an expression of hope and probably be fantasy!”

In a word they hollowed out – or attempted to – the help that government had provided. This would have meant that in these troubled times business owners would be asked to shoulder the very burden and risks that the government had sought to relieve – in order to protect the banks. In effect making it to their bailout.

The only reason this was reversed was when RBS came under pressure and because it is publicly owned it reversed its position giving the lead to the rest of the banking sector – who I assume by the time this is read will also have reversed their positions.

The Government surely should have should have set the lending criteria to the banks? The problem here is that this is an arms-race. To win you have to much cleverer, more tenacious and have more time than your opponent. It’s much easier to criticise after the event and in this case the government were clearly a bit pressed for time. But in any case the banks have had since 1397 to work up their conjuring tricks.

Bank Profiteering

Then there is a matter of profiteering. As reported by the BBC a bank, as yet unnamed, attempted to bait and switch using the government loan scheme as bait to load a business with debt at a high-interest rate as well as a personal guarantee. Not only leading to likely bankruptcy or business failure, which of course the bank would profit from in any case, but excessive revenues for the bank in the meantime. I very much doubt that this was the only instance. I strongly suspect that the banking system or at least this particular bank was trying it on.

What do You Expect?

Little wonder perhaps when, having pointed this out on social media, more than one person asked me what did I expect? While I understand the sentiment and that they have no time or trust for the banks the proper response is of course outrage! Whether we are surprised or not. This is not just important it is essential. No matter what some people think we cannot regulate or outlaw all forms of abuse or bad behaviour – that’s simply an arms race that cannot be won. We have to start expecting better, at least reasonably decent behaviour, from banks otherwise we allow them a free pass to behave as badly as they have done in the past, as badly as they please.

Galling as it is that they will be treated as key workers, paid full salaries and full bonuses off the back of handling this bailout, one way or another, even without all this abuse and bad behaviour.

No Competition?

However, it is more worrying still that now that the means exist to bypass the banks, using fintech the banks are excluding them from the table – and the government seem to be allowing them to. Why?

Peer to peer lender Funding Circle has been doing the job that the banks refuse to do, lending to businesses, to an extent that dwarfs bank lending, for the last year or two. They have been excluded.

So have businesses like the JustUs peer-to-peer platform also properly regulated and able to bypass the banks nonsense – excluded. Why?

There are fintech businesses, born-digital, which can scale with near 100% efficiency – unlike the bank which struggles with all the paperwork – when a fintech would have had an equivalent form online days ago!

I suppose it is to be expected that the banks, who after all had many centuries to hone their conjuring tricks, will try to use this as an opportunity not just for profit but to kill off the competition. But we should not, what must not allow it.

All on Profiteering Watch

Whether it’s because of inattention on the part of government – somewhat understandable under the circumstances – or the well-oiled bank lobbying machine, for the sake of all of futures it’s time they have some competition at the very least – not to mention proper scrutiny and sanctions – including personal sanctions on directors and managers of banks found wanting.

In the meantime it is up to us all to be watching, like hawks: We are on bank Profiteering Watch!

Barry E James is co-founder of the Campaign, co-chair of the Westminster Frontier Technologies Forum, founder The Crowd Data Center.

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