Anthony Hilton: Pity the borrowers stuck in the ‘bad banks’

 

The banks deserve some credit too. Thursday was also the day when Thomas Cook, the travel company, announced that it had raised £300m through a stock market rights issue at 76p a share.

Some 18 months ago, with its share price in single figures and facing out-of-control losses which threatened to overwhelm it, this company was also within hours of bankruptcy. Credit for rescuing it in this case goes to the much-maligned RBS. Given the scale of the losses, the level of debt the company had already incurred and the scale of the reorganisation needed, Derek Sach and his restructuring team within RBS were hugely courageous in their determination not to let the business collapse. Against most of the betting, they have succeeded. Now, though the company is still not profitable, it is sufficiently recovered for its shares to be up tenfold and others in the stock market to be willing to support it.

Separately, the Chancellor, George Osborne, let it be known this week that he was flirting with the idea of splitting RBS into a good bank, which could return to the stock market, and a bad bank, in which all the problem loans would be dumped.

But what Thomas Cook and Sunseeker both show is that things are often not that black and white. Companies which might appear to be basket cases can be restored to health with the right management strategy and banking support. But they need people around who know what needs to be done and have the wherewithal to do it.

Once in a bad bank one suggests troubled companies would get neither. Government would be loathe to allow new loans to be extended to allow time for a turnaround strategy to be developed, and the people skilled in doing this work would not be willing to put up with Whitehall constraints – or pay.

The downside of a bad bank is therefore that it would make it unlikely that we would see many more Thomas Cook-style rescues. Instead, businesses which could perhaps have been turned around will be left as neglected zombies – trapped by debt in a demoralised half-life, where all they earn goes on paying the interest, where there is no capital for expansion or investment, devoid indeed of hope.

That seems a high price to pay just so the Government can claim it has “solved” the banking crisis in time for the next election.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Ramsay Bolton in Game of Thrones
tvSeries 5, Episode 3 review
News
peoplePair enliven the Emirates bore-draw
News
British theoretical physicist Stephen Hawking
people
News
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence