Commentary: Banks cannot escape the flak

The criticisms of the banks over the past 18 months are getting under the skins of their chairmen. Last night Sir Jeremy Morse, chairman of Lloyds Bank, made clear in his presidential address to the Chartered Institute of Bankers that he believed the Government and the press bore some of the blame for the 'biggest wave of anti-bank sentiment since the 1930s'.

The recession, of course, was the main problem for borrowers. But he thought the Government had been happy to find someone else to share the blame for the hardships in the economy, and the 'flames have been further fanned by a press whose own standards have suffered a serious competitive erosion, not unlike that which afflicted the takeover market in the late 1980s'.

The Chancellor appears, by all accounts, to be having constructive chats with the banks that are far from the carpeting portrayed in the tabloids. But anti-bank sentiment is widespread on the back benches so there are good political reasons to encourage bank bashing, discreetly.

In the current recession, the banks have much to answer for, but small business lending margins are not the problem. The political difficulty for the Treasury is that something must be seen to be done, but this is proving hard when the Bank of England report to the Chancellor on interest rate margins has cleared the banks of failing to pass on cuts.

There is probably no escape from flak for the banks until the recession is over. In a thoughtful account of the fundamentals of banking, Sir Jeremy pointed to an erosion of old-fashioned banking, the practice of taking the long-term interests of customers into account. Customers and banks have been responsible for this deterioration. Lessons are being learnt. But the test will be whether they are remembered during the next boom.