Light touch regulation of banks, the sort of which dominated the years prior to the credit crunch, doesn’t work. If you’re not effectively regulating organisations who have a ‘gaming’ culture, catastrophes will happen, because you’re relying on people motivated by profits to make decisions in the best interest of the general public in the long term.
Let’s face it, many people bend rules to get things done in the world, but such blatant disregard for the boundaries is laughable.
So, “more regulation!” cried the media and the government. But is that really the answer? Can you imagine what would happen to the rates on your firm’s overdraft if your bank’s compliance team was doubled in size in order to turn new regulations into operational effectiveness?
Bear in mind that these organisations are still shareholder-owned companies who have to turn a profit – their proverbials are in a vice whatever happens, so you can be certain they’ll look to pass the bulk of the costs on first.
Which is why they will be no good as a long-term supporter of small businesses in the UK. And that’s without touching on the inevitable automation of services to cut costs and permanently burying the local bank manager model.
Early stage companies and mature businesses alike need finance, but why limit the search to the high street? Why not add value to your lending and garner local business expertise at the same time? Innovation has always been at the core of the British businessman’s psyche, so peer-to-peer lending is increasing in popularity all the time – and the rates are much lower than you’ll pay on an overdraft facility too.
It’s only surprising that we tolerated the status quo for so long.
