The banks are right to lend less and charge more

I agree with Deborah!

So do I - perhaps she should e-mail a copy to Vince Cable who seems to be getting more and more economically illiterate by the minute.

I don't agree. The key I think is the change to terms & conditions for small businesses that have a good track record and this has happened more than it should. It means that past behaviour doesn't count for a great deal which is clearly wrong.

100% mortgages at 6x base were clearly wrong &as were many of the loans/mortgages issued to the self certified market, but I do think in some cases the baby has been thrown out with the bath water.

The trouble is the public became accustomed to reckless easy lending and sees as the norm.

Banks are doing exactly what they should be doing in order to return to saleability - not taking risks.

Clearly if lending pracities were wrong in 2007, to ask for a return to 2007 lending levels is insanity on the part of our government.

A painfully adjustment is under way.

Of course the politicians wont tell you this, hence the rhetoric about making the evil banks lend money.

As long as the Govt seems content to make up policy on the hoof you can't blame the banks for being selective about who they lend to. The capital ratios foisted on the banks are at levels best described as being absurd. Until they come down to more reasonable levels the Govt can huff and puff for all that it is worth. As shareholders however we can begin to look forward to the time that asset values are written back and that the banks will feel able to resume paying a dividend and start buying their shares back

The politicians are changing their story, saying that small businesses are not borrowing because the bank margins (ie interest rates) are too high.

However, Eric Daniels has pointed out that interest margins for small businesses borrowing from Lloyds are no higher than in recent years.

About half of small businesses don't borrow. The half that do are often undercapitalised, the owner not wanting to risk his own money in the company if he can get the bank to provide high risk cash without them getting a share of the profits.

I agree with Deborah.

Why don't some of these economic morons like Vince Cable wake up and stop courting popular opinion from a public that generally does not understand and can only respond to the stupid headlines in the Mail or Sun.

Banks are in business to take deposits and lend money. That is how they make much of their profits. If there is a good case for lending money, then they will do it, but why in heaven's name would they lend when there is no case for it.

It is not so long ago that people like Vince Cable were lambasting them for lending irresponsibly.

Why doesn't Vinny and Georgie go the whole hog by nationalising RBS and turning it into a lending bank to anyone that asks. See how well and profitable that will go.

I don't think so.

It would of been enough to highlight the words of Douglas Williams, for the need to increase competition and stop banks ripping off the customer. Bank bashing is a myth perpetuated by the BBA. The public are genuinely and rightly concerned about the huge growth in the securitisation and derivatives market and how it effects the countries commercial banks.

Banks simply cannot lend money to business to see them through a difficult period .They should have made provision for difficult periods in their business model. The trouble is in the borrow borrow easy money world we lived in before the credit crunch business would spend profits and any expansion or rough time was expected to be financed by the banks which they invariably did .

What on earth does "take advantage of low interest rates and repay their debt" mean?

"that some people are too poor to borrow, that some business ideas are not good enough, that money isn’t cheap and least palatable of all it is easier for the wealthy to borrow than it is for those on a low income with little business experience."

I think this comment from Deborah sums the situation up nicely!!!

Nice one Deborah.

People are finding it hard to go from a position where anyone could get any amount of credit to one where their ability to repay is looked at. It's now time to restrict lending to safer bets and up the BoE interest rates to prevent banks making too much money.

Yes Ms Hyde, the chancellor having bailed the bankers out with our money has no right to ask for anything back. He should let them do what they like with it. They will of course mostly use it to pay them selves bonuses, but without that they may well decide to stay in bed until 2 pm or even take their beds and go abroad. And I hope Ms Hyde will go with them to polish their boots.

The banks have been pumped full of taxpayers money to save thier sorry skins.

They dont need to offer attractive interest to savers as they are stuffed with cash...and they are offering paltry returns to those "prudent " ( to use a gordon brown word ) enough to save for their future and not be a burden on the state.

Bankers are overpaid and out of touch with the real world.

My understanding is that the credit crunch and the financial crisis was primarily caused by irresponsible bank lending to the property sector and their over-investment in complex structured products secured against either properties or property backed debt. It seems to me that UK businesses have in part been paying the price for the reckless bank lending practices of the past and I think that the govt is absolutely right to step in where this is the case. The banks have a duty to support and provide liquidity to creditworthy, responsibly-run businesses. This is essential to the future health of our economy.

Banks are in fact only a part of the supply chain for businesses, the fact that they supply money makes them no different from, say. a supplier of steel to a washing machine manufacturer, any responsible businessman would look at his potential customer's ability to pay him and likewise a bank. Banks have no incentive to not lend to responsible companies. If some banks are treating their good customers unfairly they won't have them for long.

The banking crisis was caused by irresponsible lending driven by the bonus culture, lets hope the BoE bans bonuses payable to short termist buccaneer bankers and parasitic city slickers. Bonuses should be only available to genuine wealth creators, not as now to a bunch of people shuffling other peoples' money around and taking a rake off as it passes through their hands.

Hi Steve ... I have a similar understanding. Only, sub-prime losses alone were not nearly enough to account for the collapse. Instead, it was a fuse which lit (as you pointed out) the massive securitisation and derivatives markets bomb and the scale of leverage they involved.

We don't live in the eighteenth century folks, and nowadays we expect institutions like railways or hospitals or broadcasters or banks to serve their customers not exploit them. My bank has the cheek to try and charge me for a loan, ten times as much interest as the BoE base rate. Their board and top managers should be put in the stocks, or hanged at Tyburn...

What I object to is the bank that unilaterally increased the rate that it charged for an agreed overdraft to a long term customer at a time when it was getting its money more cheaply from the BoE.

How many more of them were there?

I don't agree with Deborah on some ogf the points she makes. I don't understand the comment (in reference to Eric Daniels of Lloyds Banking Group): "Clearly he can’t foist his money on businesses that would sensibly rather take advantage of low interest rates and repay their debt. Why would someone (sensibly) repay a debt that is costing an historically small interest rate to service?

Why are there so many tales of good long standing customers, who have not breached their covenants, being told to repay within three hours, or the company they represent will be put into administration? There seems to be as little sense in today's market as there was in yesterday's, when loans of 125% of value were the norm. The banks just never seem to get it right. Of course banks should not be lending unwisely, and I agree that imposing targets by reference to the days when they were seems stupid. But there are too many tales of Bank intransigence with good customers to ignore.

Let me offer an example of bank bad practise. I have an account with Birmingham Midshires. The account in the year 2009 had a bonus interest rate that took it to 3.25%. This came to an end in July 2010. I am required to ring them up to relocate the funds in a new account that is offering a fresh bonus rate of 2.25% that lifts the total interest to 2..75% . If I do not go through this charade the funds default to a rate of 0.5%. I ring them up and ask for the transfer (note that all the account details, codes etc., remain the same. The transfer this is not registered for some reason. I have to ring again and "fine" them for this. Does this suggest a trap for the unwary, and, should banks be engaging on this practise?

I have in the past spent time on visiting a large number of small to medium size companies in Southern UK, many that were vocal in their view that the UK's commercial banks were not giving reasonable consideration to companies loan requests or renewals. I had believed this was a serious problem and set out to help fix the problem.

I was not prepared for the amount financial rubbish that I saw, even in companies with good products or services. There were unreliable, non-existent or just plain late financial records, underqualified and undertrained financial staff, poor understanding of cash flow and a general lack of management information. In the large majority of the complaining companies I am shocked to note that my sympathy switched to the bank. When I heard amazing stories such as those above of "3 hours notice to avoid shutdown" I almost invariably found that there was a back story that was far less flattering to the company.

There were a few - but only a few - that had been treated unreasonably but there were scores that treated the bank unreasonably. Companies keeping their banks fully and correctly informed on a timely basis had far less concerns.

Surely there are some very tiresome policies around that can make dealing with these banks awkward and to the banks I would suggest that they pay attention to Australian, Canadian and Japanese banks for understanding how customer attention can be run brilliantly.

Thank goodness for a little female clear thinking after the leftish nonsense spewed out by the idiotic Tony MALsignore!

Good article, as a commercial banker I can add the following 1) Our costs of funds have gone up this has to be passed on 2) Our fingers have been burned by so called 'good' quality SME's 3) Available funds for lending is more limited and return on equity is now the key driver of pricing not growing market share (this uneconomic growth competition between the banks was one of the main drivers for the credit crunch)4) Businesses have had it all their own way for too long and John Aislabie is quite right the vast majority work to very poor standards of financial management which does not help them when Banks are being more rigorous int he credit assessment. 5) Not many good quality SME's are knocking on my door, just property developers with unviable sites.

John Aislabie is 100% right. ( as is the article!)

It has often been the case that the "hungry borrowers" are the ones that have less financial control ( either personally or as businesses.) I have been shocked at the number of times that customers will lie to their bank -" I'm paying funds in today - please honour the cheque." only to not opay in and the account ends up even further in excess and the manager sanctioning the payment has some serious explaining to do.

Those that have more financial control tend not to need the "emergency" fimnance as they understand whne they will be tight and take steps to cover it - for example presenting accurate cashflow projections backed up by documentary evidence showing that they will need a bit more cash in two months.

I understand whythe liars do it but surely people must realise that if you do lie to your bank they are less likely to trust you in the future.

Banks being too trusting is one of the lessons here - Too trusting of customers ( witness self certification mortgages) - too trusting of regulators ( They woudn't let us do things that would cause a systemic meltdown) and too trusting of staff ( honestly there is no risk on this product I don't understand .)

banks need to start beibng more realistic but also I think many in the media need to start being a little less trusting. Would a bank really cut the funding off of a good customer with 3 hours notice without a strong back story. the media shold be exposing both sides of this - the true bad cases of banks acting unreasonably but also those businesses where it is perfectly reasonavble for the bank to cut off funding due to business incompetence.

15 or16% over base loans, any company can make a profit when you borrow at 2.7%(best saving rate 2.7%0 the banks need to be made to made to lend at reasonable rates

Most small companies are suffering from cash-flow problems which require unsecured overdrafts, this is the type of business lending the banks shy away from, particually in a period of uncertain times.

Daniels comment that "Clearly he can’t foist his money on businesses that would sensibly rather take advantage of low interest rates and repay their debt."

Why would someone (sensibly) repay a debt that is costing an historically small interest rate to service?

Answer: Any business that has cash spare would use it to pay down it's debt rather than keep it invested in a bank account earning close to 0%!!

Banks are not run as charitable institutions - their job is to lend to those who have good ability to repay the loan.

Anybody who has a high risk of default should expect to pay interest, or put up a collateral such as their house. Too many so called enterpreneurs expect the banks to lend them their risk capital at bottom rock interest rates and if things go belly up just walk away without any cost to themselves.

Any sensible bank should insist that any SME they lend to the owners have significant proportion of their own ealth invested in the enterprise as well!

Good article, telling it as the banks should have been behaving, denying bad risks credit.

The bad risks keep staggering on, causing the banks grief in the process and eventually running out of room, credit and business. leading to a loss.

The banks are now much more cautious and as a result many businesses that are perhaps a tad below average are being made to suffer because they were likely to be able to continue in business with the aid of loans. The net result is going to be that businesses are going sharpen up their acts and become more efficient and hence creditworthy, after establishing a good record.

I agree with John Ness. The politicians need a whipping boy to detract from the shortcomings of their predecessors, and latterly theirs, hence their taking up the cry of Zanuliebore, who continue to whinge about the lack of lending to many potential failures, many of their voters.

The fact that Cable is a long term politician means that he could not cut it in the real world of commerce, where he would have been much better paid, if he could cut it, which clearly he couldn't. Better on theory than practice.

There were shortcomings in the bankers, but now that they have been forced back to the tried and tested disciplines of lending, they are having to refuse riskier lending. Asking them to get back to the lending amounts of 2007 is in fact asking them to return to the lax practices then prevalent and which got them into trouble, and the politicians need to be taken to task for asking bankers to throw good money after bad.

Perhaps to stop the politicians banging away on this they should be asked to pool their assets (not the taxpayers) as a resource to make up the losses suffered as a result of the riskier lending requested. The result will be that they immediately stop asking others to take risks they wouldn't.