Archives for posts with tag: Banks

“Banks have been bailed out by taxpayers and the state continues to shower enormous gifts upon them”, thunders Professor Prem Sikka. “Despite this banks show no sense of social responsibility and continue to close local branches, leaving many without adequate financial services”.

The rate of branch closures accelerates and over the past five years more than 430 communities have lost their last bank.

Recently a reader saw a local butcher unable to make a sale because he hadn’t enough change to give his customer. He explained that two Lloyds Bank branches nearby by had closed, and now the nearest one – two miles away – had closed.

lloyds-bank-lewes-scene-image-2

Lloyds Lewes branch now closed

She remembered that the Post Office had offered routine services to the customers of Santander and the Co-op for some years but was not able to tell the butcher that this extended to his bank.

As he does not use a computer she searched on his behalf and found out that, during the days of a slightly kinder coalition government, the impact of these closures was mitigated when a deal was co-ordinated by Liberal Democrat Business Secretary Vince Cable.

In 2015, reportedly under Government pressure, the country’s major high street banks signed a pact  that allowed all their personal customers  and businesses with fewer than 50 employees access their banks at their local post office – putting the 11,500-strong Post Office network at the heart of local communities.

This move meant that bank customers are able to put cash and cheques into current accounts, check on balances and withdraw cash.

As this relatively young man had no idea these services existed and did not appear to know how to access information, one wonders how many small traders are struggling with cash transactions because they don’t realise that there are still some services available – unless of course further post office closures take place.

 

 

 

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It was good to see Cllr John Clancy raising an allied subject in the Birmingham Post. As he points out: “If you are a small business, especially if you’re a sole trader or small partnership, a delay in the basic payments you are owed can be commercially fatal.”

Nick Starling, Director of General Insurance, also wrote last year deploring the injustice of our insolvency system where, “overnight, small businesses that have been trading in good faith find it an uphill struggle to get bills paid or to retain title to goods they have supplied.”

Cllr Clancy reminds us that when LDV went into administration the workers had to wait for two years before  getting paid: “Others who, to be frank, could better absorb losses found themselves paid out first.”

The first claims to be satisfied are those of ‘secured creditors’ the banks and the administrators; the people who have actually done the work and supplied the goods often get little or no payment.

Ensure that business insolvency does not radiate catastrophically outwards into the commercial and social community

Clancy’s suggestion; “Well, let’s now build an insolvency legal framework which redresses the balance and provides that just being a secured bank creditor, especially a bailed-out one, does not give you first bite of the cherry . . . and ensure that business insolvency does not radiate catastrophically outwards into that business’s commercial and social community.

Sauce for the banking goose is sauce for the SME business sector

He proposes that “Just as we saved the banking system in its entirety, so should we adapt insolvency laws to ensure that wider commercial and social communities are saved in the event one business’s failure. What’s sauce for the goose…..?”

As taxpayers’ intervened in the banking markets to protect the entire system by a whole range of measures at the time of the crisis and since, Clancy suggests that “until taxpayer support is withdrawn from the system in its entirety . . . the ranking of the banks in the pecking order on insolvencies should be downgraded a few notches.

Banks are ‘veritable commercial basket cases’ with ‘turbo-charged rights’ when it comes to insolvency

Pre-empting critics who will say that we should let the free market decide and those unable to cope with the normal exigencies of business should be best left to go to the wall, he points out that it’s not survival of the fittest when it comes to bailed out banks: they are veritable commercial basket cases, but they get turbo-charged rights when it comes to insolvency.

Cllr Clancy’s recommendation: “ I would suggest that paying out swiftly and without question to ordinary employees what they are owed should be the permanent priority in insolvency in any event. The LDV workers should have had their money years ago.”

 

Cllr. Clancy’s Post article is now online.

 

Since the loss of its ‘preferred credit status’ in 2003, HMRC is said to have ‘ramped up’ distraint visits.

Accounting Web reports that the number of occasions its powers have been used to seize assets has quadrupled in just two years, rising to 7,004 in the twelve months to April 2011 from 1,675 cases two years ago. The assets are typically sold off at ‘fire sale’ prices that fail to cover the amount of unpaid tax and reduce the chances of other creditors being repaid.

Stuart McNeill, from law firm McGrigors, believes that: “By barging in and selling the assets of a late paying company without making a proper commercial assessment of the firm’s medium term viability, HMRC risk sacrificing full payment in a few months’ time for far less cash up front.”

Seizing the assets of businesses that might otherwise recover is driving many to insolvency and directly contradicts HMRC’s ‘Time To Pay’ scheme, which aims to support small businesses through the negotiation of late payments.

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Banks who now prematurely push the administration button should be made to ‘pause for thought’

Cllr John Clancy writes:

“It has been a nauseating feature of the last few years that the banks who went belly up themselves are less than sympathetic when it comes to others simply hovering around insolvency.

“The rights and entitlements of being first secured creditor means that the bailed-out banks in particular, who are desperate to build up their pretend capital bases, are more likely to push the liquidate or administration button in order quickly to get out of a business, crystallising a debt asset as much as possible short-term, regardless of the wider commercial or employee consequences.

If they realised it wasn’t that easy, and that others might be paid out before them, then perhaps an appropriate pause for thought by the bank might be a good thing for the entire system.

Yesterday the BBC website reported that, in a leaked letter to David Cameron and Nick Clegg, Vince Cable proposes that RBS should be turned into a new “British business bank” – but the measures proposed by John Clancy would be far more beneficial to the country’s SMEs, averting or better ordering many business insolvencies which “radiate catastrophically outwards into the commercial and social community”.