COMMENT : Banks must resign themselves to more openness

The fuss about whether banks overcharge their small business customers has tended to take a back seat in recent months to the wider issue of "excessive" profits and executive pay. It may be about to erupt anew, however, thanks to the Bank of England's public request for more detail on the interest rates charged to small businesses.

It has been more than a year since Eddie George said both sides were at fault in the small business/banking war - both unreasonable small businesses and insensitive big banks. He promised that the Bank of England would try to develop criteria for monitoring the relationship between banks and small firms more objectively.

The aim of this latest initiative is not so much to expose charging practices to the cold light of day, though this might be a side-effect, as to find out more about how monetary policy is transmitted through the economy. The commercial banks fear a rather broader purpose than the understanding of economic policy, however.

They argue that further interest rate information - even averaged across all lenders and broad categories of borrowers - is too sensitive to publish. Unlike the mortgage market, where the rules for rates for different categories of borrower are clear and simple, there are wide variations in business loans, a practice justified by the need to allow for different degrees of risk. The charge on a small business loan can vary from 1 to 5 or more percentage points above base rate. Transaction charges also vary hugely. It is easy to see how tables of interest charges would be used as another weapon to bludgeon the big, bad banks by the unfortunates paying above average.

The banks should resign themselves to providing more information and educating the public about it, however. If the Bank of England wanted to publish commercially sensitive details about individual banks' charges, then it might be a different matter. But what the Bank wants to do is benchmark the cost of different types of lending and record how it changes.

Since almost all small businesses seem to feel aggrieved about their banks, a fair proportion might find themselves pleasantly surprised to find they are paying less than the average interest rate. Anything that might help the cause of competition in this oligopoly of an industry, as transparency surely would, must in any case be a good thing.

Not just the Bank of England but also the public needs to assess how well monetary policy is working, as opposed to how much banks are expanding and contracting their margins on different kinds of business. The transparency of interest rate decisions is an important element of the credibility of the policy regime the Bank is trying to operate. The commercial banks should accept that more openness on their part would be in the public interest. If they are not prepared to provide the information voluntarily, then they should be forced to.

Cable has a long wait ahead for the pay-off

The cable industry investment bubble seems to have been a more short- lived phenomenon than even the sceptics were predicting. With General Cable, which has been marketing a new issue of shares in recent days, it has well and truly burst.

To get the issue away, the sponsors have had to considerably reduce the asking price. It is not hard to see why. In little more than a year there have been six listings on the US Nasdaq exchange of UK cable companies, and two in the UK since last autumn. The market's appetite for this particular investment delicacy has been force-fed to the point of acute indigestion. Two recently listed UK cable companies - TeleWest and Videotron - are both trading below their issue price. And Nynex CableComms was last week forced to delay its float, citing problems with US regulators.

With General Cable now deciding to lower its sights, pricing its stock at a more modest 190p a share rather than the hoped-for upper limit of 225p, the signal will have been sent out to cable companies waiting in the wings that investors for, the time being at least, have had enough. This is not to suggest that the sector is fundamentally flawed - far from it. With three revenue streams to tap - residential cable, residential telephony and business telephony - the industry is more or less assured of a viable future. Its main competition on the broadcasting side, satellite, is forecast to reach a plateau within two or three years. Moreoever, BT is to be kept out of the cable market until the end of the decade, giving cable operators as good a chance as any commercial business ever gets to establish themselves.

But the pay-off won't come for many years yet. Most of the network has not even been built, while there remains resistance among potential customers in areas where cable is available. No wonder investors are looking askance at inflated issue prices and shunning some of the companies that have already come to market. The next few cable operators in the queue will have to considerably lower their expectations.

Ford has always had its logic

The Ford pay settlement used to be an annual event almost as important as the Budget in setting the agenda for the economy. Would it force the pace on wage inflation, lead to a strike that could undermine the trade figures or start a new round of productivity improvements? The nation, and the rest of manufacturing industry, waited with bated breath for smoke signals from Dagenham, a byword for difficult industrial relations.

Ford repeatedly threatened to move production and close the plant as it battled with high costs and low output. In 1989, it actually went through with the threat and moved production of the Sierra away from the troublesome Essex men. Now those days are history and Dagenham is expanding with a £200m diesel engine plant.

Indeed, Essex stands to benefit greatly from Ford's reorganisation into the first truly global car company in which models for different markets will have far more in common than they do now. And so will the components industry, which has become a British success story, with the help of a lot of prompting from Japanese manufacturers that have set up here.

But although Dagenham no doubt deserves its new-found reputation, the decision to invest in Britain also has something in common with the logic that kept Ford here through even the worst times. Britain still offers cheap labour and very little in the way of industrial relations red tape, the primary reason the Japanese have been so strongly attracted to the UK over the last 10 years. Eurosceptics beware, they also come here because Britain provides a gateway to Europe.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee