City: Out of credit
Sunday 20 December 1992
To a degree he is right. Politicians are brazen about it; any opportunity to deflect blame for the recession from themselves on to someone else is grabbed shamelessly. Bankers make easy scapegoats. For the press too, banks are obvious targets when the going gets tough. But come on, Sir Jeremy. Are not bankers just a teeny weeny, little bit culpable? Did they not bring most of this on themselves?
The first wave of bank-bashing came when the press started publicising the complaints of small business customers. Bankers appeared to be overcharging and in some cases foreclosing unnecessarily. That in turn unleashed a wave of pent-up anger from ordinary current account holders, milked to pay for a catalogue of lending disasters. Forget Maxwell, Brent Walker and the thousands of other lesser cases of reckless lending laid bare by recession; last week alone there were two rather more immediate examples.
Barclays was forced publicly to announce the provision of pounds 240m against a pounds 422m exposure to Imry, a property company whose best known achievement was concreting over the remains of Shakespeare's Rose Theatre in Southwark, south London. The site is now occupied by a vacant office block (since sold) that nobody wants to use, with the original theatre buried somewhere in the basement. Much of the lending to Imry took place at the very moment the commercial property market went into a nosedive; it appears to be a classic case of banking misjudgement and mismanagement. How could Barclays have allowed itself to become so exposed to a single borrower? According to Barclays, the Imry loans were vetted in the normal way, and went through all the usual procedures. If this was normality, you have to ask yourself what that means for the rest of the bank's pounds 8bn property portfolio. And Andrew Buxton, who was in a key management position when the Imry loans were made, still wonders why institutional shareholders are so fiercely opposed to him combining the role of chairman and chief executive? If he had nothing to do with the Imry decision, as Barclays says, why on earth not? Is it the habit of senior managers at Barclays not to get involved in major lending decisions? Either way, Mr Buxton has a lot of explaining to do.
The other example is the Gateway supermarkets chain, now into its third or fourth refinancing (sorry, one loses count). Three years ago, Gateway was the subject of a highly leveraged pounds 2.1bn buyout, most of it financed by the banks. Since then just about everything that could go wrong has done. The original management has long since departed, collecting pay-offs along the way that by any standards looked obscene ( pounds 1m in the case of David Smith, the man who persuaded the banks to back this grand folly), and the company itself staggers from one debt-induced crisis to the next. In the course of it all, the banks have lost a packet.
One way or another, it is you and me who end up paying for this ballooning money-go-round. We have every justification in feeling aggrieved. If there is one thing that can be said with certainty about the present round of bank-bashing, it is that without it the situation would be a good sight worse. At least it has knocked some complacency out of the British banking system.
Yet in his speech last week, Sir Jeremy suggested that there was something dangerous in such sustained criticism. A successful modern economy was dependent on a sound banking system, he said, and he warned of the consequences of renewed attack. 'In the case of most business products, the more you can sell the better. But this is emphatically not true of bank loans.'
Quite so. It's only a shame Barclays and others that pursued growth for the sake of it in the late 1980s were not more alive to such principles when they might have done some good.
- 2 Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
- 5 Amal Clooney gives excellent answer to fashion question at European Court of Human Rights
King Salman: Just five days in, Saudi Arabia's new king has already overseen a beheading
Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
Amal Clooney gives excellent answer to fashion question at European Court of Human Rights
Mafia's wall of silence broken: Victim of Cosa Nostra's extortion rackets in its Corleone heartland co-operates with authorities for the first time ever
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
Negotiable: Tradewind Recruitment: This post arises as a result of the need to...
£120 - £150 per annum: Tradewind Recruitment: I am recruiting on instruction o...
£70000 per annum: Ashdown Group: Head of Finance - Financial Controller - Fina...
£24000 - £28000 per annum + benefits: Ashdown Group: Marketing Executive - Wim...