ONE thing about bankers, you have to give them credit for having a brass neck.
However, you might have thought they would have wound their brazen necks in until all that hoopla about their greedy ways had died down. But no, up popped a spokesperson for the British Bankers’ Association in Northern Ireland recently suggesting that a “bad bank” be set up to take the bad loans off the hands of the local money lenders.
Now, on the face of it, this seems all fine and dandy. Take the bad debt away from the banks and all of a sudden kindly managers would miraculously emerge to approve loans and overdrafts to the sort of small businesses that are currently going to the wall due to the lack of short term working capital, despite being perfectly viable going concerns in every other respect.
Believe that and you will believe anything.
The government has been shoving billions of pounds worth of cash into the British banking system via the controversial quantitative easing scheme, basically printing electronic money, but instead of using it to lend to businesses, the banks have taken the cash to go gambling on the stock market (hence the mini-bubble in share prices}. That and paying themselves bonuses and pay rises.
So it’s trebles all round in the City and P45s in triplicate in the real world.
This is why we should be very wary of the banks lobbying for a Northern Ireland version of NAMA, the state-controlled organisation that bought up all the bad debts and failed property ventures, from the Irish banking sector, and that it would deliver any benefit.
The Northern Ireland banking sector never failed in the same manner as the Republic’s, and there is no strong evidence that they are really suffering from a shortage of money to lend to local businesses, if they were minded to. Some local banks, such as the Ulster Bank, have already received bailouts via the taxpayer’s cash injected into its parent company the RBS.
Given their past behaviour there is the big risk that using public money to buy out the bad debt remaining on the local banks’ books would simply be a case of throwing good money after bad; and that the bankers would simply wave goodbye to a problem as it was passed to the taxpayer and set about the usual business of looking after themselves.
It is noticeable that the Bankers’ spokesperson, whilst keen on pushing the idea of the taxpayer taking on extra burden and risk, had little to offer as to how small businesses might find credit easier to obtain.
In the Republic there is little sign that the NAMA experiment has encouraged banks to support local industry. And across the UK, despite the promises to the contrary made in order to get their hands on bailout money and quantitative easing cash, the banks are still not lending to business.
Last week we saw the numbers, and they are not pretty. In 2011 net lending fell by £10.7 billion and lending to business has fallen in every single quarter of the past three years.
This may be partly due to the reduced level of economic activity, but there is plenty of anecdotal evidence that the banks are just not interested in lending to business at the moment, no matter how much cash they are sitting on.
Setting aside the unavoidable scepticism over the bankers’ motives, it may be the case that banks are simply not lending to business in Northern Ireland because the province is deemed a bad business risk.
The bankers’ thinking can be seen in an economic report recently issued by The Ulster Bank that stated: “Whilst the UK recorded its highest rate of growth in employment in eleven months, Northern Ireland’s private sector firms posted their sharpest rate of job losses since June last year, with all sectors reporting lower staffing levels in January.” The same report also found that there has been no growth in private sector business here for over four years.
This against a backcloth of massive state dependency at a time when the UK government is under pressure to act faster to reduce the national deficit.
Add to that the Assembly’s failure to get to grips with the economy or even produce anything that would be recognised internationally as a coherent economic policy, and it is easy to see why a bank surveying the globe to identify the best places to lend its money might decide that Northern Ireland is a high risk region.
It is probable that Northern Ireland business en masse is suffering a hidden credit rating downgrade.
It has now transpired that there have been some discussions on the matter of a Northern Ireland bad bank with Finance Minister Sammy Wilson, who said: “We need to find some way of divorcing those property loans which many businesses foolishly got involved in during the boom, from core businesses.”
Heaven forbid anyone should be asked to clear up the consequences of their own foolishness themselves! Yes, that is right, we have a finance minister who appears still not to have grabbed the concept of moral hazard! And once again the default political response problem is a headline-grabbing bodge by throwing taxpayers’ money at it.