The ONLY cure for bank malaise
THERE is virtually not a day that goes by without my receiving a letter, telephone call or email from an entrepreneur who believes they are a victim of their bank. On some days, the complaints pile in.
A few days ago I sat down with one businesswoman and was horrified to listen to how she had fought for more than a decade, how she had lost her marriage and her house and been reduced to staying temporarily in bed and breakfast accommodation.
Noel Edmonds, who told in this newspaper how he lost his Unique business group after dealing with a convicted fraudster at the notorious HBOS Reading branch, has been deluged by people who have had similar experiences.
The banks are now much safer than they were before the meltdown. The Bank of England is bringing in a new regime to ensure taxpayers will never again be forced to spend billions of pounds bailing out failed lenders.
Bosses found guilty of reckless banking will face jail; lenders are required to have more capital as a cushion when times are tough, and the banks have been fined to within an inch of their lives for money-laundering, mis-selling and other malfeasance. (Though perhaps they still haven’t learned their lesson, as Standard Chartered and HSBC are facing an investigation over whether they acted as a conduit for dirty money in South Africa.)
Amid all the attempts to clean out the stables, the treatment of small and medium firms is a glaring piece of unfinished business. The banks were reluctant even to admit there is a problem until the men at the core of the HBOS Reading scandal were sentenced to jail.
There is shockingly little accountability. Lending to small firms is not regulated, and the Financial Ombudsman can only deal with the very smallest companies, and even then only to a limited extent, with a very low ceiling on the value of claims.
A significant number of companies have no recourse at all other than going to law. That is prohibitive for most, which is why The Mail on Sunday is campaigning for an independent tribunal or a credible ombudsman for small firms.
We have garnered widespread support. Even the banks themselves accept something must be done, though some are arguing merely for an extension to the existing Financial Ombudsman.
That would be highly unsatisfactory.
The current ombudsman is geared to individuals, not firms, and there is a huge difference.
Business claims are often highly complicated; the sums of money are larger; more specialist expertise is needed to deal with them; and the impact on the individuals concerned is often life-changing. Trying to rectify the damage is like putting Humpty Dumpty back together again.
A properly skilled and staffed ombudsman or tribunal is the only answer – just tacking small firms on to the existing ombudsman and hoping for the best would be a sop to the banks. It takes guts to go into business, but it can be a hugely positive force.
I know this from my own grandmother, who was born into poverty as one of 17 children and put into service in her early teens.
She transformed the lives of her children and grandchildren by becoming an entrepreneur, opening a fish and chip shop with her cousin Sarah to cater for hungry steelworkers in a rough part of Middlesbrough.
As soon as I could count, I was drafted in to tot up the takings on the living room floor, where I would try to stack the coins in neat piles before my baby brother could crawl round and knock them over.
Entrepreneurship is social mobility in action.
That’s just one reason we shouldn’t allow even one more family business to be brought low by the banks.
My grandmother transformed lives by becoming an entrepreneur