A Parliamentary commission investigating a “huge breakdown in trust between the public and the banks” took key evidence from Birmingham businesses amid fears of a damaging “tick-box” mentality.
The newly-launched Parliamentary Commission on Banking Standards spoke to regional business leaders as part of a wide-ranging inquiry into standards in the banking sector following the Libor scandal, PPI mis-selling and money laundering allegations.
Wolverhampton South East MP Pat McFadden, lead member of the panel on the consumer and SME experience of banks, said the announcement of the new Business Bank by Vince Cable underlined the problem of credit for firms.
“This committee was set up by Parliament after the Libor scandal and it has been asked to look into the standards and corporate governance of banking. We want to take the Commission out of Westminster to come here to talk directly about the experiences of business and consumers.
“There has been a huge breakdown in trust between the public and the banks. Libor is not the only scandal – there is the mis-selling of PPI, there are allegations of money-laundering, in addition to the collapse a few years ago.
“We need to get the credit flowing that business needs to create jobs to contribute to economic growth.
“The announcement (of the Business Bank) is evidence that the Government thinks that there is a problem. Businesses do tell us that there is a problem about the availability of credit and a change in terms of the credit available.
“Business cannot take normal investment decisions to renew machinery and take on new people unless they have the support of an efficient financial system.”
Fellow panel member John Thurso MP said: “Over the last 15 years banks changed from being a trusted presence on the High Street to become retail boutiques where the sale of products that did not help ordinary British consumers became a priority over sound finance.
“There are no human beings in the system; if you do not tick the boxes of the matrix, you do not get the money. Banks have ceased to be customer-centred. They do not think about the customer as the centre of what they do but rather as the recipient of products they wish to sell.”
Mr McFadden said the banking bailout of October 2008 had been critical to avoid consequences ‘too awful to contemplate.’ “If we had allowed the banks to go under, it would have meant cash-machines stopping working. No Government could have taken any other action.
“What clearly happened is a retrenchment by banks; they are rebuilding their balance sheets.”
Meanwhile, Birmingham Chamber of Commerce said the new Business Bank announced this week by Business Secretary Vince Cable would help to fill an estimated £59 billion gap in lending over the next five years.
Chamber president Michael Ward said: “This is an immediate imperative because a recent survey of Chamber members found that 40 per cent identified access to finance issues as one of the greatest barriers to growth.
“The Breedon Report has estimated that despite increased traditional bank lending there will be an approximately £59 billion finance gap for SMEs over the next five years. A new state-backed Business Bank has the potential to meet a proportion of this demand provided the Government ensures it has sufficient working capital and focuses resource on small and fast-growing SMEs.”