UK banking providers in ‘downward spiral,’ says ex HSBC boss

Business banking news review: week ending 17 Jan 2013

The former chairman of HSBC made waves recently by announcing that high street banking providers admit in¬†private that they’re in a ‘downward spiral.’

Lord Green, one-time HSBC chairman and current trade minister, made the admission to the small business committee in the House of Lords recently that banking executives have been making poor decision after poor decision when it comes to providing personal and business loans. In addition, small business bank account holders are given short shrift by banks, building societies, and other major lenders, Lord Green said, while lenders’ investment banking arms engage in behaviour more akin to what you’d find in a casino than anywhere else – often to the detriment of retail and commercial banking.

The key problem here is that investment banking has come to hold a major allure in the financial services industry, with the smart and talented young bankers all eschewing branch management and instead flock to Canary Wharf . Business banking today has suffered from this loss in talent, Lord Green remarked, though current banking bosses have dismissed any allegations that relationship managers in commercial and retail banking branches lack the experience or power to make proper lending decisions.

Lord Green says that this flies in the face of the evidence he has seen with his own eyes, which involves eyewitness accounts of small business owners getting raked over the coals by not just one bank official in an isolated incident but several. However, the trade minister did have some good news, remarking that while it won’t be possible to turn things around overnight, the chief executives of these banks are indeed aware of the problem and are working on internal measures to rectify the situation.

Modifying the current status quo cannot come too soon, considering how small business lending has fallen since the credit crunch. In fact, companies have received more than ¬£150 billion less in bank lending since the final days of 2008 – and issues such as the Libor scandal have only helped to cement popular opinion against the nation’s major financial service providers.

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