CONCURRENT MEETING OF THE COMMITTEE FOR FINANCE AND PERSONNEL AND COMMITTEE FOR ENTERPRISE, TRADE AND INVESTMENT

Quite clearly a unique approach is going to be needed to meet a unique situation. Governments had to do new and unprecedented things to save the banks and that now has to be the spirit in which the banks approach their customers in the circumstances in which they find themselves. Simply because a Lender can demand a repayment or a renegotiation of terms to meet a short term target doesn’t mean that he has a moral right to do so.

To have banks with sound balance sheets but surrounded by a host of bankrupted businesses or underfunded businesses living in fear of bankruptcy, is not going to build a flourishing economy.

And many of the business people who have spoken to the Church Leader’s are very, very fearful. These are people often with many years business experience who have been through many ups and downs over the years. And now they are fearful. Fearful that they will lose their homes and afraid that they will ruin their families. Fearful that the businesses they have built up (and which they know are good business) will go under for the lack of funds. And, I have to say, afraid that if they are publically critical of Lenders that they will find funds even harder to come by.

And that leads to business people who are demoralised and ultimately it will lead to a society that is demoralised, and unable to pick itself up. To have unnecessarily failed businesses will drive up public sector costs and lead to heaven knows what depth social instability.

Some of the specific difficulties which particularly SMEs have raised with the Church Leaders are:

-pressure to renew loans at a much higher rate, despite the fact that the underlying risk to the Lender is not much greater.

-where the risk is greater for the Lender it is often because the value of the asset against which the loan was secured ( usually property) has diminished, a situation for which the banks bear a fair amount of responsibility.

Businesses would stand a much better chance of survival if they were not paying punitive interest rates which bear little relation to the actual cost of money

Another problem raised very often is what I’m sure you have heard of called the “slow no”. There simply does not seem to be a sufficient number of experienced people in local branches to handle business credit applications. Credit decisions are made elsewhere and can be a long time coming.

There certainly is the feeling that there were many cut backs at manager level in banks after they had passed out of local ownership, meaning that the branches were largely staffed by lower paid, less experienced people.

And to make matters worse, when decisions are made, and the answer is no, it is impossible to have access to the decision makers-usually Head Office Credit Committees.

This also means that the local bank is not in any real sense part of the local business community. There is no opportunity to build up trust, or even detailed knowledge of a client’s business, that would help in making really well informed, appropriate decisions about credit.

The strong feeling amongst business people that they just don’t count and haven’t any means by which to convince Lenders that they do count. There are a great many businesses who simply do not know where to turn to get a fair hearing

The businesses who have spoken to the Church Leaders are perfectly well aware that the Bank’s are under pressure to strengthen their balance sheets and to build up greater capital reserves, but it cannot be done regardless of the consequences to everyone else in the business world and it would ultimately be counterproductive to do so.

Just to conclude I would like to point out very clearly that the Church Leaders are not suggesting that every business should be supported regardless of its capacity to continue as a going concern, but that each should be transparently assessed using fair criteria and have the facility to put there case to those who have the expertise to make decisions.