Bernard Ginns: One per cent soiling reputation of the region’s bankers

I heard a claim last week that bankers’ bonuses equate to one per cent of annual gross domestic product.

That was from the economist Diane Coyle, who delivered the annual Joseph Rowntree Foundation lecture to a packed auditorium at York University.

Ms Coyle, vice chairman of the BBC Trust, suggested that top bankers have gamed the system, through what she called “rent-seeking behaviour”.

She said: “There can be little doubt that extremely high pay has become embedded through market power and institutionalised pay structures.

“Merger waves in leading sectors of the economy, notably banking, have reduced market discipline on prices and service quality and increased the profit share of GDP.”

She blames the financial sector for setting the tone throughout the corporate sector, adding acidly that the justification that those rewards were based on performance “looks threadbare” post crisis.

Small shareholders have failed to discipline executives by having too little of the vote; while large shareholders have no incentive to bother, said Ms Coyle.

“Large companies are characterised by directors who are drawn from narrow circles, sometimes sit on each others’ boards, and continually ratchet up their incomes through a structure of so-called performance pay designed by remuneration consultants who are hired by the executives whose remuneration they are supposed to be assessing. None of them, not their big investors, have any incentive to rock the boat.”

That certainly has the ring of truth. Unfortunately, the negative sentiment towards bankers taints not just the denizens of the City but also those hard at work in the regions, who play an essential role financing the wheels of industry.

Earlier this year, I revealed how Lloyds Banking Group is investing in its corporate banking team in Yorkshire, which can be taken as a sign of confidence in this region.

Lloyds hired three big hitters, Geoff Durkin and Jim Sparling from Barclays and Stephen Harris from Royal Bank of Scotland, to build the team.

The taxpayer-backed bank has made cuts elsewhere to reinvest in corporate Britain, which it clearly sees as a growth area.

Mr Harris told me: “We think there are opportunities in the market for growth. We think the market has been subdued but we think corporates have a sense of cautious optimism.

“We also think any recovery is likely to be led by business investment.

“Corporates are cautiously dusting off their plans for growth. They need to do something otherwise they are standing still.

“While there are wider macro issues, they can influence their business in their markets.

“UK corporate balance sheets are relatively strong. Placing cash on deposit account gets a relatively low return. How do they make that cash work better in their business?”

Mr Durkin is heading up Lloyds’ complex deals team, which works alongside the bank’s relationship directors in Yorkshire to supply big firepower when necessary.

He said corporates have spent two years looking inwardly and are now starting to look at acquisitions at home and overseas. He is recruiting in preparation.

A common complaint from businesses post-credit crunch is that credit functions have been centralised, which means relationships in Yorkshire count for nothing when it comes to important lending decisions.

Lloyds has its 18-strong North credit team at Lisbon House in Leeds, which it says is capable of agreeing “significant” sums without deference to London. “We have all the tools here,” said Mr Harris.

The proof, as they say, will be in the pudding and I welcome any feedback from corporates. (And I know the story remains very different for small businesses.)

Meanwhile, I’m still waiting for a meeting with Ben Andrews of Barclays, described by one high-flying contact as “Yorkshire’s most powerful banker” because of his ability to engage with senior people and impressive portfolio of clients, including some of the region’s biggest and best plcs.

I’ve put in requests for a catch up, but apparently he isn’t “media trained”. Come on, Barclays. There’s a good story to be told about banks here in Yorkshire.

The search is now on for Yorkshire’s best environmental business.

If you think you’ve got what it takes, I urge you to enter the fourth annual Yorkshire Post Environment Awards.

Companies have until March 30 to get their entries in. Enter online at www.yorkshirepost.co.uk