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
ebooksA special investigation by Andy McSmith
Arts and Entertainment
The write stuff: masters of story-telling James Joyce, left, and Thomas Hardy
books...begging to differ, John Walsh can't even begin to number the ways
Jose Mourinho on Sky Sports
footballEXCLUSIVE COLUMN Paul Scholes: It was not a leg-breaking tackle, as the Chelsea manager had claimed
Romelu Lukaku scored twice to add to the hat-trick he registered in the first leg in Switzerland
Arts and Entertainment
Natural beauty: Aidan Turner stars in the new series of Poldark
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Anna Woodward: German Speaking Accountant

£45,000: Anna Woodward: My client is aleading global manufacturer and service ...

Danielle Degan: Accounts Payable Executive

£13 - £15 Hourly Rate: Danielle Degan: Are you looking for a Purchase Ledger r...

Jemma Gent: International Management Accountant

£150 - £200 Day Rate: Jemma Gent: Are you as an experienced accountant with ex...

George Parlour: Assistant Accountant

£13 - £15 Hourly Rate: George Parlour: Do you want to give something back? Th...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower