City: Out of credit

BANKS have always been unpopular; recession has turned them into some of the most hated institutions in the land. Who's to blame? In large part, according to Sir Jeremy Morse, chairman of Lloyds, it is the Government and the press. Last week, he accused them of encouraging the 'biggest wave of anti-bank sentiment in Britain since the 1930s'.

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.

Life and Style
life
News
Brad Pitt and Angelina Jolie reportedly married in secret on Saturday
peopleSpokesperson for couple confirms they tied the knot on Saturday after almost a decade together
Life and Style
Chen Mao recovers in BK Hospital, Seoul
health
News
Joan Rivers has reportedly been hospitalised after she stopped breathing during surgery
people81-year-old 'stopped breathing' during vocal chord surgery
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
tv
News
i100
Arts and Entertainment
Diana from the Great British Bake Off 2014
tvProducers confirm contestant left because of illness
Arts and Entertainment
Lisa Kudrow, Courtney Cox and Jennifer Anniston reunite for a mini Friends sketch on Jimmy Kimmel Live
tv
Life and Style
fashion

Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
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 General

Client-Side web developer (JQuery, Javascript, UI, JMX, FIX)

Negotiable: Harrington Starr: Client-Side web developer (JQuery, Javascript, U...

Structured Finance

Highly Competitive Salary: Austen Lloyd: CITY - An excellent new instruction w...

SQL Server Developer

£500 per day: Harrington Starr: SQL Server Developer SQL, PHP, C#, Real Time,...

C#.NET Developer

£600 per day: Harrington Starr: C#.NET Developer C#, Win Forms, WPF, WCF, MVVM...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone