It’s all down to the banks, now.
Not necessarily a phrase to induce confidence a mere eleven years after the banking crisis, but it is true. The Chancellor has pulled out all the stops to provide support mechanisms for companies and employees during the Covid -19 crisis.
His rapid actions in the first phase left many cracks but his statement on Thursday night has plugged most of those. There is still work to be done on supporting small businesses where the owner took most of her or his income through dividends, and in getting the funding for the furlough scheme flowing, but now it is up to the intermediaries – and those are our banks.
Banks have two simple tasks. Both seem to be defeating them, or they have decided they do not want to play.
First, to keep companies afloat through bridging finance as they wait for government support. Secondly, provide the only route to coronavirus business interruption loan funding from government. They are doing neither effectively and this failure falls on their leadership.
It is remarkable that the NHS, military, emergency services, and government departments are delivering huge feats of endeavour from standing starts while the leadership of banks simply seems to complain about a shortage of staff and the volume of requests.
Yet they do appear to have the time to argue to toss with the Bank of England about whether they should pay dividends and debate internally whether they should pay themselves bonuses. This is not a good look.
The leadership of our public services are paid salaries that barely amount to the expense accounts of senior bankers, yet we are told we have attracted to the tops of our financial institutions the very best of talent.
Well, it takes a second crisis to demonstrate that we appear not to have people who can cope when the chips are down. More importantly, despite pandemics being almost at the top of every national risk register, they appear not to have spent any time in planning to maintain their key public service function in such circumstances; to keep cash flowing to individuals and small companies.
Banks have whittled away at their capacity to engage effectively with small and medium enterprise.
The front line of banks are massively overburdened and do not have the depth of relationship or decision-making authority that they need for quick action.
It has become painfully obvious that most lending decisions are being taken on algorithmic assessment of the risk of a business sector rather than the specialist ability of a small business banker to understand an individual company. SMEs are being offered loans with outrageous interest rates and demands for security from every possible source (including non-executives).
There is a grave suspicion that this sort of behaviour is designed to fail; so the banks can say they did make funds available but it is hardly their fault if they were not taken up.
In the end, banks are simply not stepping up to the plate. Of course, not all are like this. Some are doing well in some areas; but at times like this you are measured by the behaviour of your tribe.
The City of London Corporation has a key role to play. It rightly sings the praises of our financial services ecosystem and through visits abroad and ceremonial grandeur in London, promotes the abilities of the City. But that will only continue to ring true if the City is now prepared to publicly require its community to deliver the goods. The City Corporation is a public institution and it must push financial services to deliver their social contract and fulfil their licence to operate.
And when this is all over, we must review that licence to operate. Every individual and every entity (business, charity, government) have the entirety of their economic existences managed through a bank. Any post Covid-19 enquiry will need to set new rules and expectations on the financial services community and give them a licence to operate only on fulfilment of those obligations.
Bankers must reconcile themselves to the fact that there will be no nationwide round of applause for them at 8pm one evening. But they must move fast to avoid a very bad alternative.
There is a serious danger that at the end of the pandemic, the senior bankers and financiers will look as if they personally stood secure and safe on the hillside while the battle raged, only to descend to the field at dusk to pick through the remains.