New lending rules for banks: what's really at stake is choice for borrowers

Forget banks' "competitive disadvantages".

“Give us a chance, mate”, seems to sum up the reaction from new banks, to a report by the Independent Commission on Banking which claims they must hold up to seven times as much capital against mortgage loans as their high street rivals.

The regulation behind this state of affairs, specifically the offering of lower capital requirements to those banks able to use their own databases to model risk on individual loans, is being criticised because only the biggest banks have the critical mass to earn the rewards.

Of course, the rationale that capital requirements wouldn’t be lowered unless regulators felt the database resources of those favoured were of sufficient scale to mitigate the risk of doing so sounds a bit dull in its affirmation that bigger, in some cases, really is better in banking.

More stirring, surely, to condemn the rules as stifling to the range of borrowing options available to consumers and small businesses at a competitive rate. Hence comments in the FT about a “glass ceiling” from Arbuthnot-owned Secure Trust Bank and “competitive disadvantage” from new bank Aldermore.

Once again, it’s the unstoppable force of “SMEs must be fed” smashing into the immovable object of “banks must be risk-averse”; a ringing collision that has underscored four years of regulatory discussion like a tireless blacksmith bashing away at the back of a press conference.

What’s at stake in this particular iteration of the discussion is the range of mortgage options borrowers have access to. Regulatory impact on this range is definitely not great for the competitive landscape, and certainly frustrating to smaller banks, but it’s by no means hobbling. Aldermore, for example, is well known for having grown at a blistering rate since its inception in 2009, and has had little difficulty picking up all the new business it has had an appetite for.

It’s more troubling, perhaps, to remember how the same issue of capital requirements can prove fatal to the big league.

“Increased regulatory requirements coupled with additional fiscal charges, the on-going economic malaise and other negative ‘head-winds’ require a serious response”, read an explanation sent to me by the press office of Netherlands-based banking group ING at the end of October last year.

What the statement was casually explaining was the decision by the group – based on pressure on its capital base caused by obligations both to Basel III regulation and the Dutch government – to kick a £1.5bn hole in the UK asset finance market by putting subsidiary ING Lease UK into run-off mode.

ING Lease was hugely profitable, and provided a lifeline for thousands of small businesses in need of equipment finance – but it didn’t matter. It was just too much of a drain on what was available.

Looking at the asset finance market now (where Aldermore is, out of interest, one of the banks racing to fill the gigantic gap left by ING), it’s clear to see how the demands of regulation really can have a brutal impact on the choices available to borrowers. 

Photograph: Getty Images

By day, Fred Crawley is editor of Credit Today and Insolvency Today. By night, he reviews graphic novels for the New Statesman.

Getty
Show Hide image

Despite its Brexit victory, the hate-addicted right rages on – but the left is silent

The Brexit victors aren’t addicted to independence. They’re addicted to hatred.

The weirdest thing about Brexit is how angry the victors are. You would expect the losers to be sore – but open any British newspaper and it’s as if getting what they wanted has rendered the winners yet more snappish. At any time, you can guarantee that the medium least likely to offer principled opposition to any assault on democracy is the British press. Even so, it’s astonishing to open a copy of the Daily Telegraph and find that a byline has become a mere technicality, a breakwater for the eye. Page after page, countless squads of identical bald clones drone on – all chorus, no counterpoint – ranting about the evils of a Europe, which, in theory, they are supposed to have vanquished.

What is the point of having so many writers when they all write the same article? It turns out that it wasn’t Europe they wanted to leave. It was contemporary Britain. They’re not addicted to independence. They’re addicted to hatred.

In the United States, television and newspaper reporters have understood that their president is out to get them. So they are fighting back, challenging him on his lies in a way that the BBC does not dare. Women, African Americans and Latinos have all staged impressive demonstrations to disrupt the idea that the current state of affairs in the US is either necessary or, more important, normal. Republican senators aiming to take away their voters’ rights to health care have been facing impassioned town-hall meetings. There is exhilarating satire on television.

But over here, the 48 per cent of people who feared a loveless future of cringing isolation, austerity and social backwardness have been largely content to take defeat on the chin, as though cowed by the fact that so many of the poorest among us don’t agree.

In Britain, the silence is eerie. We know from experience that it takes time for artists and film-makers to respond to sudden changes of temperature.

Margaret Thatcher was first elected in 1979, but it wasn’t until 1982 that we were enlightened by Alan Bleasdale’s Boys from the Blackstuff; My Beautiful Laundrette didn’t ­arrive until 1985; and it was 1987 before Caryl Churchill gave us Serious Money – a full eight years after Thatcher’s election.

All three works may enjoy an enduring power and authority denied to the collected speeches of Norman Tebbit. They define the era. But they all came too late to do anything more than raise morale. The damage had been done. You may feel that the musical of Billy Elliot nailed Thatcher’s government definitively, but it began to offer its insights 15 years after her resignation.

Politics in the West is in a mess because no one can answer the question of why Western labour should continue to enjoy its relative privileges when labour in the rest of the world can offer to do our work so much more cheaply. The standard answers from left and right are equally unconvincing and polluted by residual imperialist attitudes to race. Conservatives swing wildly. On some days, they behave as if they can continue to enjoy the free movement of capital while planning to forbid the free movement of labour. On others, they pretend that they still believe in the same market that failed so spectacularly ten years ago.

Neither position is coherent, and the mix of the two is crazy. But the left has done little better to explain how social justice can be advanced in the face of an international buffeting that has no care for workers’ rights.

In 2015, Ed Miliband, the then leader of the Labour Party, went into the general election without having decided whether he was or wasn’t going to defend the Keynesian public spending that had saved Britain from the corruption of the banks. The present leader of the Conservative Party, always marching fearlessly behind a thick cladding of popular prejudice, is implementing a European divorce against which she campaigned only a year ago. Small wonder that people have so little hope of Westminster.

Historically, we have always been taught that change comes from below. When people suffer intolerably, they overturn the cause of their suffering. Yet they still need representatives who can articulate their needs. Revulsion has to bubble up soon, but so do policies.

In our daily lives, we all meet people who are thoughtful, kind-hearted, efficient and serious. We encounter such people in medicine, in education, in law enforcement and in social care, and it is their generosity and foresight that make life worth living. Yet Theresa May is content to hug close individuals who would be thrown out of any job but politics. Her Foreign Secretary, Boris Johnson, was sacked by the Times for lying. Her Transport Secretary, Chris Grayling, was accused of trying to interfere with a prison inspection report while he was justice secretary, and he banned sending books to prisoners.

Most inexplicable of all was the elevation of Liam Fox, her International Trade Secretary, who is in permanent disgrace because he has refused fully to admit wrongdoing for overclaiming expenses and using public money to pay a close friend who attended 57 per cent of his Ministry of Defence engagements without security clearance.

Why on earth are such people promoted by a vicar’s daughter who boasts of her moral values? It is in that disparity between who we are and how we are represented that the best hope of opposition lies.

Disbelief will shade into outrage, even if Labour continues to be led by a man blithely indifferent to the practicalities of getting ­anything done. Confronted with the ascen­dancy of scoundrels such as Fox, Grayling and Johnson, anyone, from any part of the UK, will agree with Karl Marx: shame is the only revolutionary emotion.

David Hare is a playwright

This article first appeared in the 30 March 2017 issue of the New Statesman, Wanted: an opposition