Lack of training and inadequate regulation of company directors are the main culprits, Lord Alexander, chairman of the bank, seemed to suggest in a speech to the Insolvency Lawyers Association yesterday.
His theme was that if the Department of Trade and Industry were better at pursuing recalcitrant directors, and more effort were put into business and financial training, many insolvencies among small businesses could be avoided.
There speaks a true banker. Not our fault that we squandered hundreds of millions of pounds of depositors' and shareholders' money on dodgy lending - all down to the Government, seemed to be the general line.
Warming to his theme, Lord Alexander went on to opine that it was 'an alarming fact that one in four directors in currently active companies has been involved with a company which has failed in the past six years. This suggests a clear need to raise standards of management and accountability of company directors'.
Few would disagree that business standards in Britain leave a lot to be desired, but more regulation? Who needs that in a country still desperately trying to revive an entrepreneurial business culture? Not surprisingly, nearly all Britain's main business organisations take issue with Lord Alexander's remarks.
The Institute of Directors, Confederation of British Industry and British Chambers of Commerce all object to his siren calls for more regulation. A red-blooded entrepreneurial culture needs trial and error, learning by mistakes, not more red tape. In the US you are not considered a proper businessman until you have gone bust at least once. If they are doing their job adequately bankers should be capable of looking after their own interests.
But what about the trail of other creditors and shareholders left with hefty losses after each failure?
Significantly, the above bodies all agree that more training is needed and that the existing rules on disqualifying fraudulent or incompetent directors should be more fully implemented. If the DTI's disqualification unit is given more resources, it can put the present laws into practice properly.
Nor can any right-thinking person applaud the practice of 'phoenix companies', where directors put their company into liquidation only to restart the same business in all but name the next day - leaving the previous creditors without a penny. The point should be made, however, that plenty of bankers, as secured creditors, have conspired in such schemes.
Of course there is much to be done in tightening procedures. But please, no more tears of self-pity from bankers. If they lend to the wrong borrower they only have themselves to blame.Reuse content