Tuesday, 26 November 2013

Southport businesses failed by Banks

Major national newspapers and the main television news led on the story of a Southport business brought to its knees by the antics of RBS Bank

Vince Cable forced the issue of the failure of banks to do their job properly by commissioning a report  about their behavior towards small businesses . He has now referred the issue to the regulators

i have long argued that RBS is too big and dominates the market-especially for small business loans. The bank should be broken up and new regional banks established. Since the war pretty well all our local banks and mutual financial institutions have been wiped out. A thriving economies needs local banks where decision are made by people who know the local circumstances not by computers programmed hundreds of miles away. 

One of the most worrying aspects was that the banks were more interested in 'building share holder value' than helping businesses to thrive. The short-termism of our financial sector was one of the key causes of the crash in 2008. 

In rebuilding the financial sector we need to have more mutually owned institutions whose first loyalty is to their members. It is revealing that since the crash it has been the small mutuals who have been among the best lenders to Small and Medium size enterprises. It other successful market economies there are thriving local banks funding new enterprises. We need them in the UK. Breaking up RBS re-establishing banks like Williams and Glynn and Martins would be a first stage

Christmas is coming and no doubt many of us will watch 'It's a wonderful life' with James Stewart. His mutual bank: 'Bailey Saving and Loan' may have been fictitious but we could certainly do with local banks serving local needs again

Eddie Warren and his wife Cheryl lost more than £1million, their livelihood and their marriage after borrowing from RBS.
The couple bought the Bold Hotel in Southport in 2007 for £3.7million, using £1.2million of their own money and  taking out a loan from the bank.
A condition of the loan was that they had to take out an interest rate swap to protect them when base rates increased, but this led to them paying high fixed interest on their loans and an additional £120,000 a year in penalties as rates tumbled. After the hotel was placed in RBS’s Global Restructuring Group it was valued at just £1.8million. By the autumn of 2011, the business was pushed into administration.
RBS property company West Register bought the hotel for £1.4million several months later. 
The bank claims the business may only just break even when it is sold but Mr Warren says it could soon be worth £4million as the property market recovers. 
He said: ‘They stole it. Even if the property market was depressed it would be worth £3million.’

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