ears over a double-dip recession have intensified in the past week, with economic data in the UK, US and elsewhere suggesting the global recovery is slowing, many commentators have again turned their attention to the banks.
Even as the banks return to profit, the argument goes, they are constraining growth by reducing lending to businesses and employing excessively tight credit conditions.
But this picture differs significantly from the post-crisis reality. That is why I was glad to hear Bank of England governor Mervyn King recently acknowledge: “Banks are not being awkward or bloody minded in their attitude, they are facing higher costs of funding... it is not a question of blaming people, this is a direct consequence of the financial crisis.”
Blaming the banks ignores the fact that business lending is not simply a supply-side issue which can be resolved by setting arbitrary targets.
The appetite for risk and leverage has dropped off significantly since 2007. Indeed, firms are increasingly looking to reduce debts as they assess the immediate and long-term consequences of the recession.
Of course, the City must work hard to ensure viable businesses receive appropriate funding. So I welcome the fact that the industry is proactively coming together to form a new taskforce, chaired by Stephen Green, to achieve precisely this outcome.
This initiative also needs to be backed by greater clarity on the regulatory front – particularly Basel III – so that banks can review their capital position with confidence while simultaneously extending credit to projects with acceptable risk profiles.
The industry is working hard to support the recovery by making sure customers of all sizes know they are open for business. This applies not just domestically, but also overseas. At a time when David Cameron is eager to “reorientate British foreign policy and make the foreign office more commercially minded”, it is important to remember financial services are Britain’s biggest export industry.
Net foreign earnings totalled £41.8bn in 2009 – half of the £82bn trade deficit in goods – according to figures from TheCityUK. Banks accounted for £25bn of this, with insurance (£8.3bn), fund managers (£2.9bn) and securities traders (£1.4bn) also making substantial contributions.
With many major economies looking to exports to compensate for lower domestic demand, we should support an industry that is one of the UK’s success stories in this increasingly competitive field.
Nick Anstee is Lord Mayor of the City of London