I’m really frustrated between what the government is saying, the media is reporting, the behaviour of banks, the thrust of business and the reality of life.
Governments worldwide are locking down and, at the same time, saying they’re going to help citizens and business; media is telling everyone there’s help, support, money, aid out there; banks are receiving ten times more calls with ten times less staff as a result, and responding hardly at all; business has dried up and no one can make a decision about anything; and life is on hold.
In particular, I’ll come back to that point about government and banks and focus in on the UK. The UK government announced an emergency loan scheme called CBILS – the Coronavirus Business Interruption Loan Scheme – back on 11th March. So far, hardly any businesses have got a loan. As of 14th April, just over £1 billion had been approved for 6,000 loans out of 28,000 applications. But this is disguising the truth.
The truth is that the government-backed bank called RBS has been approving some loans in a timely manner. The rest of the UK banks have been sitting on their arse. They’re dealing with requests, but not taking applications; if they get an application, they’re not processing it; if they process it, they ask for securitisation against the director’s personal assets and property; and if they don’t get the securitisation, they refuse the loan.
Thousands of small and large businesses will be bankrupted by this crisis, and it’s the government’s fault. The government shut down the country and then grand-standed that they would support business and the economy but, in reality, have done absolutely nothing.
I think it was summed up best by two tweets that I saw. One was mine. It was prompted when a banking friend of mine sent me an email and, in it, made clear as to why banks don’t like what government is doing.
Comment from a banking friend:
“I am seething at a Government encouraging citizens to borrow through banks. If you want to support citizens, give them the money direct. Don’t ask banks to do what they should never do - lend to those who can’t pay it back.”
— Chris Skinner (@Chris_Skinner) April 18, 2020
… which garnered this reply from Steve Webb …
I’m seething that banks aren’t doing their job of lending to viable businesses that can pay it back. Like the two small businesses I’m assisting, profitable over several years, need the loan to survive the next few months have solid plans to return to profit this year. #CBILS
— Steve Webb (@Stevewebbtbc) April 18, 2020
My own experience - as I decided to try and get the government CBILS loan - is that I logged a call with the bank a month ago. Finally got a reply a week ago. Their response was that I have to show last year's accounts and they will lend half of last year's profits as a max (which is a joke). I sent all the info, but never heard back. Called again and, as usual, call times are over an hour so I hung up. The banks just don't want to do this lending and are doing their best to disengage with the customer when the customer needs them most.
Similarly, talking with friends, they are telling me the banks are demanding securitisation of any loans against assets, which is explicitly opposite to what the government said. However, the government does not own the banks - except RBS/NatWest - so they cannot tell the banks what to do, even if they guarantee 80% of the loan. If I take a million pound loan, that still means the bank is liable for £200,000 and, as a shareholder owned institution, why should they take that risk?
TBH, I agree with my banker friend. If the government really wanted to ensure survival of the economy post-crisis, they should deal direct with small businesses and not ask the banks to do their job for them. But the real bottom-line here is that Boris Johnson and Rishi Sunak can say how much they're looking after everyone but, if none of their promises are delivered, they're just a waste of space. We are living in terrible times, and the fact that the government and media are show-casing the idea that they’re there for their citizens and businesses is an absolute joke when they are not.
All in all, the dialogue is typified by this article I picked up in The Financial Times:
“A fierce debate is under way between those who believe that the current lockdowns in place across much of the world are an overreaction, and those who believe it would be barbaric to do anything other than try to avoid as many coronavirus deaths as possible.”
I shared this article on twitter …
Lockdown: a complete over reaction that is killing jobs and the economy or a justified position to ensure the sick don't die ... where do you sit? https://t.co/zr6ETiHtDH
— Chris Skinner (@Chris_Skinner) April 17, 2020
… and got an interesting reaction that was fairly divided between those who believe we had to lockdown to avoid a tsunami of sick people drowning the health services, versus those who believe it is natural selection, and those who die should die.
The latter view is ruthless and ignores the human cost, but they argue that we should have focused on the cost of those who are equally suffering financially, economically and healthwise. For example, one of the things that is notable in this lockdown crisis is that those who have strokes, heart attacks, cancer and other health issues are avoiding hospitals, in fear of getting coronavirus. How many of those are dying? How many are getting suicidal due losing their income and job? How many are arguing in their domestic lockdown? How many are being beaten at home because their alcoholic alpha partner cannot handle this?
I’m sorry and shouldn’t write these things on my blog, but this blog is not some detached view of a guy in technology and banking. It’s a guy who feels the pain out there today. We can sugar coat it, but there is no sugar coating to the coronavirus lockdown situation. It’s a bitter moment which governments need to address fast. They cannot just let everything rot. Sort it out.
And how do they sort it out? What’s the solution?
Governments basically need to distribute support direct. Don’t ask banks to do free loans. The government should do free loans. Don’t ask banks to give citizens cheques. Give citizens cheques direct.
I agree with my banking friend. If the government has to shut the economy and tell everyone to close doors, they should be there for them and give them support direct. Don’t use and then blame the banks for not doing what the government wants. What the government wants should be done by the government. Get over it and deal directly with the emergency that is now going to be the Greatest Recession not since 1929. It will be the Greatest Recession ever.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...