How are UK banks and bankers responding to the coronavirus crisis?
A recent Chartered Banker Institute webinar hosted by President Bill McCall, and attended by an audience of several hundred, explored UK banks’ involvement in responding to the crisis caused by the COVID-19 pandemic.
Steve Pateman, Vice President at the Chartered Banker Institute, highlighted that the inherent uncertainty of the situation means both banks and businesses lack the necessary data for accurate modelling and risk analysis.
“The fundamental anchor points they would look to are not there. People cannot say: ‘Well in September I’ll open my hotel and it will be 50% full and the room rate will be X, and in November I’ll be running Y conference,’ and so forth.”
He said that businesses would need to reconsider their cost and delivery models and think very differently about gearing going forward.
James Kirkup, Director of Westminster-based think tank the Social Market Foundation, said that the issue of purpose was becoming crystallised for all companies, but particularly for banks due to the folk memory of the 2008 financial crisis.
“I think it’s being amplified particularly by the injection of public money into the private sector, that taxpayers are effectively providing support for companies. I think what we’re seeing is the emergence of a wider social expectation that companies need to do something beyond returning value to owners.”
Bill McCall pointed to the various sieves through which money from the UK Government’s Coronavirus Business Interruption Loan Scheme (CBILS) is passing, from HM Treasury to the British Business Bank to the high street banks, as a potential reason why less than 1% of the £330bn available has so far been handed out.
James Kirkup contrasted this with the vast sums essentially being given away directly by HMRC without check via the UK Government’s furlough scheme.
Commenting on political and social expectations for British banks to support the community and country, Kirkup said: “It is very striking that the narrative is so similar to the post-financial crisis criticism banks faced over failure to lend.”
Steve Pateman explained that the criteria banks have been asked to apply makes it difficult for them to approve loans with the level of enthusiasm and veracity initially implied by the scheme.
“The only way you’re going to get the money to flow more quickly into the economy, if you think that is the right thing, is for a lot of those guidelines to be loosened somewhat.”
Alex Fraser, Chief Executive of the London Institute of Business and Finance, suggested there was an underlying issue in that banks had historically prioritised investment in digital customer experience over back end operations. With staff unwilling or unable to go to work in call centres, banks were struggling to reinvent their entire business processes.
“You could argue that should have been done a long time ago because for as long as I’ve been around we’ve been talking about banks needing to sort out legacy systems,” he added.
Looking to the future Fraser was optimistic about the potential of the crisis to force banks’ hands both in terms of unlocking the power of technology and of purpose.
Though describing it as dwarfing the financial crisis both in terms of complexity and uncertainty, Steve Pateman was also cautiously optimistic.
“I think we’ve done the best we can falling off a cliff, and at some point we need to build a parachute so that we have a safe landing. We haven’t built that parachute yet but that’s not to say that we can’t build it.”
You can watch the full webcast on demand here.