It's Cheaper to get credit elsewhere so what are banks for?

by liamssoft | March 4, 2013 at 10:54 pm

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The other day, Tony Curzon-Price was approached to see if he'd put some money in a risky venture. Actually, on a moment's reflection, it was an unbelievably risky venture. An acquaintance of an acquaintance was reputed to be a brilliant mechanic but had had some previous, unspecified brush with the law for which he was just ending time in prison. Would I like to put up £10k for him to start up a garage when he got out? The returns, I was assured, would be very healthy and the man was utterly trustworthy, whatever it was he was inside for.

It didn't take Tony long to come to the view that much as he'd like to help someone to restart their lives, the chances of seeing his £10k again were slight. Quite apart from the risk that the person in question was not indeed reformed, it can't be that simple to make an honest pound as a mechanic ... there's hardly a shortage ... And he don't have lots of sums of that size lying around ... so he quickly decided to pass.

But a local bank manager - were there still such people - might have given this particular entrepreneur a proper look. After all, if you back 10 garages, then the risk they all go belly up is reduced. You gather local knowledge, you assess the good character of your borrowers and you poll the risk. I'm not saying the bank manager would have invested. But he might have done. He might especially have done if one of those Tory policy favourites, the social impact bonds, could have complemented the returns on the assumption that a garage would have kept the mechanic out of trouble. So, in the old days, I might have put my £10k savings into the bank and that might have made its way into a spread of projects like the one that I was personally too risk-averse to try myself.....opendemocracy.net

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Banks rob billions in handouts

Chancellor George Osborne's Funding For Lending hand outs are mostly just funding banks' shareholders, official figures showed today.

Bank of England figures revealed that the Treasury ploughed £9.5 billion into the Chancellor's flagship scheme last quarter - only to see lending actually plummet by £2.4bn.

The Chancellor touted the scheme as a cure for banks' refusing to lend following the economic meltdown. But today's figures showed little change for all the dosh.

Total spending on the scheme has amounted to £13.8bn since its launch in June.

Barclays had lent nearly all the £6bn it had claimed but Santander had taken £1bn while its own lending shrank by more than six times that amount.

Meanwhile RBS and Lloyds, both bailed out and part-owned by the taxpayer, siphoned off vast amounts only to watch their lending dwindle by even larger figures.

Lloyds had drawn £3bn yet lending fell by £3.1bn last quarter and RBS had received £750m but lending still fell by £1.7bn.

The Bank of England said that it expected credit conditions to improve over the course of this year.....Read more

Osborne stands alone as EU backs bonus cap

Chancellor George Osborne stood isolated after European Union finance ministers vowed to press on with proposals to curb bankers' bonuses.

He told a meeting of EU finance ministers that he could not back the plans, which he fears could damage London's financial centre.

The EU is proposing to cap bonuses to 100% of a banker's annual salary, or to 200% if shareholders approve.

There will be further talks, but all other countries backed the plan.....Read more

£215m for investment bankers in £600m RBS bonus pot despite £5.2bn losses

Royal Bank of Scotland paid out more than £600m in bonuses with £215m handed to investment bankers despite admitting to a “chastening year” in which it lost £5.2bn.

Chief executive Stephen Hester also gave warning of “another choppy year ahead of us” as the bank battles to clean up the legacy left to it by Fred Goodwin.

The bank blamed much of the losses on those “legacy issues” including the mis-selling of payment protection insurance and its traders’ involvement in the Libor fixing scandals which cost nearly £400m in fines.

The loss, which compared to £1.2bn last year, was largely down to changes in the value of Royal Bank of Scotland’s own debt, or the cost of buying it back. That accounting charge was responsible for £4.6bn.

But even without it the bank would still have been in the red as it made £2.2bn of provisions, much of which was to cover various scandals which the bank has been involved with....Read more