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Bankers need to recognise depth of anger in the country
IF you believe in the ideal of a fair and just society, the chances are you will find the concept of bonuses for bankers to be morally repugnant.
Barely a year after the whole financial system was saved from collapse by using taxpayers' money, the banks are at it again, preparing to lavish obscene sums on themselves in an orgy of greed while the real economy suffers the worst recession in living memory.
I wonder how the owner of a small or medium-sized business feels when he reads about the multi-million pound guaranteed bonuses at banks that have survived only because of a massive injection of public cash.
Owner-managers have found that when they need help from the banks it is either not there or prohibitively expensive.
They feel angry and let down and there is a view among small businesses that banks are now in profiteering mode. They believe the banks are making money out of the misery of struggling businesses.
Following a characteristically disappointing display from the Financial Services Authority last week, in which its chief executive Hector Sants virtually admitted he was powerless to stop the culture of excess in the City, the politicians have twigged that there is huge public anger over the pay packets for the people who brought our economic system to the edge of disaster.
First was George Osborne, the Shadow Chancellor, who used an interview in Saturday's Guardian to say that he would crack down on bonuses and outlaw them at banks that have benefited from state support.
"These banks need to live in the real world, where the country's in a deep recession, and where the taxpayer has spent billions of pounds, not just bailing out some failed banks, but also underpinning the rest of the banking system," he said.
Chancellor Alistair Darling then came out with something stronger the following day in an interview with the Sunday Times.
"If we need to change the law and toughen things up, we can do that. I'm quite clear that some of the problems we have today were caused by the fact that some traders were incentivised to take risks which neither they nor their bosses fully understood."
The City's defenders say that, as with Premiership football, massive pay-packets are a necessary part of the system and if we hit the Square Mile too hard the wealth-generating financial institutions will up sticks and go overseas.
They say that the City is one of the UK's only assets which allows it to truly compete on the global stage and contributes vast taxes to the Exchequer.
We've all seen what happens when you place too much reliance on financial services. We in the UK are still paying the price and are mired in recession, while neighbours France and Germany edge into daylight with moves towards economic growth.
I agree with Charlie Bean, the deputy governor of the Bank of England, who said that financial services should be the handmaiden to the main economy, not the overlord.
BUSINESSES that are fed up with banks could always vote with their feet and look for alternative sources when they need to raise finance.
One avenue might be the online, person-to-person marketplace. Zopa is an example in this emerging sector.
The company, founded in 2005, cuts out the middleman – the bank – and puts lenders directly in touch with borrowers.
To date it claims to have arranged more than 50m in loans and has in excess of 300,000 members in the UK.
Zopa's profile is growing and a recent count gives it 14,071 borrowers and 2,347 lenders in Yorkshire.
Company spokesman Martin Campbell said while criteria is for lending is based on an individual's personal situation and not a business plan, the company is seeing more approaches from people using loans to fund business activity.
He said Zopa has just taken its first step into business lending, with the launch last month of the Olderpreneur scheme.
In tandem with the Prince of Wales-backed charity Prime, the scheme invites people aged 50 and older to submit business plans in support of a loan request for approval by the charity.
Those that are successful are posted on the website with 50 per cent of the loan guaranteed.
Managing director Giles Andrews said: "I know bankers still dismiss peer-to-peer lending as a competitive threat because we are tiny in comparison but eBay was tiny once – and it's now the biggest retailer in the world."
It's an interesting model for the future of financial services and I'd like to hear of any similar operations here in Yorkshire.
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Saturday 11 February 2012
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