A Finextra member 25 November, 2008, 10:25 0 likes

It was me, guv.

As I mentioned, at the end of the day we have to trust bankers (and I mean those in branches, not those people at the 'centre' who have never been lending managers) , who have been trained to lend, to make those decisions.  It helps nobody to be lent money, for a business or in personal life, to support a project that will fail - they just end up in a mess (as we have seen).

It was interesting to see how RBS has announced it will honour facilities for the next 12-18 months, at current prices and at current levels.  What I also saw elsewhere (and indeed in the press release on the RBS website) was that there is a rider, i.e., that such commitment is subject to risk profiles not changing.  That is really the only reason why overdrafts should be called in, or repriced, anyway, so what did the announcement really achieve (except that it seems to have been misreported as unconditional in some quarters).  What the announcement says is that, unlike in normal circumstances, the overdrafts are committed (subject to the rider).  Overdrafts have alwasy been 'repayable on demand', although how many times that clause has been invoked outside of deteriorating risk profiles is open to debate.

I also saw something that said HMG is to establish some kind of panel to review bank lending practices.  This fills me with dread and would crystallise the spectre that I raised - that of untrained people second-guessing the banks (and even possibly overriding them).

We got into this mess because banks, for whatever reason, lent unwisely.  Now we know this, we should let them rediscover their prudence and recitfy the issue of overindebtedness, not force them to overlend to unprofitable businesses (and people).