Banks: running away and hiding?

Banks may be having trouble lending money to businesses but they still seem pretty good at one thing: scoring own goals.
Their collective decision not to attend a series of events across the East Midlands aimed at advising small firms how to get through recession will be seen as at best baffling, at worst short-sighted.
At the very least, it will reinforce prejudices held by those businesses who believe banks are little more than fair-weather friends.
More seriously for the economy, it adds weight to the belief that what the banks say nationally is simply not reflected in the reality of their grassroots decision-making.
For weeks now, rumours have been circulating in the Nottinghamshire business community that banks are refusing routine overdraft requests, even holding back money for confirmed forward orders.
Worse still are claims that some have been on the receiving end of Friday afternoon e-mails asking for money back – by Monday.
Some of these stories may be exaggerated tales that have their origins in a belief that the 'relationship banking' that banks featured in countless marketing campaigns doesn’t include the 'for richer, for poorer' bit supposed to be a central part of most relationships.
That's not entirely fair.
Banks were bound to cut back on lending, not just because there's less money about but because they were too free and easy handing it over in the first place.
Some of that money funded top-of-the-market businesses which are unlikely to survive no matter how much money you throw at them. There are simply fewer customers about, and recessions inevitably claim casualties whatever banks do.
But some of it is routine business finance for companies which, though they may be having a tough time now, have a fundamentally sound long-term proposition.
They are the victims of remote decision-making which applies a one-size-fits-all analysis to financial decisions based not on a rigorous appraisal of the prospects for an individual business but on the internal financial targets of the bank.
Understandably, banks are extremely nervous about losing money in failed businesses after racking up gargantuan losses on the obscure investment products that sparked the global credit crunch.
But it is blindingly obvious that they need to do far more to explain their decision-making to small, privately-owned companies who need help negotiating an economic minefield – businesses, moreover, who have often been scrupulously careful to avoid over-extending themselves.
Banks may have worried that they would be confronted by a wall of criticism in a room full of business people, while the East Midlands Development Agency, which organised the events, would not have wanted an advice event to descend into a scrap.
But the banks' decision simply means that criticism will only get louder. Being there for business would prove their commitment to small firms goes beyond marketing campaigns