Only a few weeks ago Stephen Hester, the soon-to-be former chief executive of the Royal Bank of Scotland, said in an interview that his bank was "desperate to lend more to the real economy" and that it was lending as "much as it can". In what appeared as a direct dig at the Chancellor, George Osborne, and his other political masters who kept pushing him to lend more to the wider economy, Hester added that the only way the bank could do so would be "if someone told us that we did not have to operate by any commercial standard, and that it could then undercut everyone else because it didn't have to make a profit".
Reading this back now, his comments can only have been aimed as a put-down to Mr Osborne.
Mr Hester went even further, arguing that company bosses are reluctant to borrow because they don't have confidence in economic recovery, and that this was why RBS had £20bn more of deposits on its books than it had loans. And, presumably, this was why net lending by RBS – which has about 40 per cent of the SME lending market – was down £4bn over the past year while requests for loans from small businesses was down by 19 per cent.
Yet all the surveys from the Bank of England on lending, as well as anecdotal evidence from individual business people, suggests that they do want to borrow more. But what these businesses are also saying is that they are so fed up with being turned down by the big banks – RBS and Lloyds have 60 per cent of the SME market between them – that they have given up asking for loans.
It's human nature. If the object of your desire repeatedly spurns your advances, what do you do? Find someone new. And that's what SMEs are now doing, seeking alternative sources of finance such as private equity and business angels, as well as newer methods such as crowdfunding and peer-to-peer lending.
So who is right? Mr Hester (right) or small business owners? Probably both, because lending has become a chicken-and-egg puzzle.
For now, Mr Osborne has sided with the small business owners (he has an election to win). It's true that tensions between him and Mr Hester have been prickly for sometime, after disagreements over a number of issues, ranging from the decision to slash the investment bank – which Hester opposed – to the sale of the US Citizens subsidiary, which he also thought was badly timed. An investment banker by trade, Stephen Hester wanted to keep a bigger capital-markets division to service its corporate clients.
But it appears that the differences in opinion over lending may have been the final straw. It's certainly a much more plausible excuse than the one being given that RBS needed a chief executive who could stay another five years to oversee the privatisation programme.
In fact, the Chancellor gave the game away when, after the usual thanks to Mr Hester, he said RBS should focus on being a bank that "provides greater support to the British economy, helping businesses and job creation".
The Business Secretary, Vince Cable, who has also been open in his criticism of the lack of lending by RBS and Lloyds, made similar remarks about Mr Hester's departure. Mr Osborne and Mr Cable speaking with one tongue? That is interesting.
You can bet the Chancellor's annual speech at the Mansion House this week will be livelier than usual. The evening is meant to be a formal farewell to Sir Mervyn King, who steps down as Bank of England governor at the end of the month, but it is fast turning into a mass memorial for some of the City's top bankers. At least another four are on the way out: Bank deputy governor Paul Tucker, who resigned suddenly on Friday; Lloyds chairman Sir Win Bischoff, due to leave soon; Mr Hester, who will be gone by the end of the year; and now RBS chairman Sir Philip Hampton, who has also hinted that he may not be around much longer.
In his speech, Mr Osborne is expected to give more details about the first share sale in Lloyds, as well as add flesh to RBS's future. If he has any sense, this will include breaking the bank up into a "good" and "bad" bank, as the banking standards commission is expected to recommend. It's still not too late to do so and should put more backbone into RBS's share price which took a hit after Mr Hester's sudden exit. It has been said that the Chancellor has the look of a powdered French aristocrat but, right now, he is acting more like one of the sans-culotte.