The Lending Policy of National Westminster Bank and Royal Bank of Scotland

I came across a case which illustrates perfectly the problems that the banking industry is continuing to cause in our economy. It is better neither a borrower nor a lender be, not just because borrowing can ruin friendships and distort them, but because borrowers in effect put themselves in the hands of the lenders and while those hands may be safe for a time eventually the lender’s greed ruins the borrower. What follows is a true story.

A small company employees three people, one of whom is a part time worker who earns £15,000 a year. The company has an overdraft of £10,000 which is fully secured on property, where NatWest has a first and only mortgage. The bank decided that its lending policy would be best fulfilled by taking away the overdraft in two stages – £5,000 of the overdraft would be taken away in one month and the remaining £5,000 in the following month. In exchange for having the overdraft facility of £5,000 for the second month the bank charges a fee of £175, which makes the real interest rate very close to the rates charged by Wonga.

Now losing that small overdraft facility will cause the small company some difficulty, which it may have to solve by terminating the employment of the part time worker and requiring the remaining staff (one of whom is a part owner) to work harder and longer hours. The decision to remove the £10,000 overdraft is due to the policy of the National Westminster Bank, the small company is assured, but of course nowhere is that policy written down save for a short item on the NatWest web site which states “As a responsible lender we cannot offer credit to applicants who may find it difficult to meet the repayments.”

You might think that fair enough; a fully secured overdraft of £10,000 is not a great deal of money and the likelihood of it being repaid is very high – probably in the region of 99.99%.

At the same time that this is happening to the small company, the part time employee visits his bank, which is also NatWest. His “manager” or advisor at the branch offers the employee an unsecured overdraft of £2,000 and a credit card with a limit of a further £2,000. The offer is unsolicited and is declined by the part time employee. The part time employee knows that he will not be able to afford to repay an overdraft in the short term and if he runs up a credit card debt of £2,000 he will not be able to repay that either.

Now clearly the NatWest are not telling the truth when they write about its lending policy. My analysis is that the NatWest are actively seeking to get small businesses to repay loans, even if the loans are fully justified, fully secured and important to those small businesses.  Such loans these days if historic bear an interest rate of around 2% a year and the bank can additional make a few hundred quid a year in “arrangement fees”. The NatWest and RBS are clearly seeking to reduce their lending to small businesses.

At the same time the NatWest RBS Group are seeking to increase their lending to ordinary people. Here they can charge at rates of around 10% on overdrafts plus around 20% on credit cards. One edict has been given to bank officials who manage business accounts “get the lending down” and another edict has gone to officials who manage personal accounts “get the borrowing up”.

The bank is doing this in the belief that it will strengthen its depleted balance sheet, torn to shreds by bad decisions by its directors over the years and further damaged by greed which resulted in losses on speculation and also by overpaying many of its staff. Of course the bank will not achieve this as the case that I have quoted illustrates. It will replace good lending with bad lending. Ultimately if this policy is pursued we all must have great fears about the solvency y of the bank in the future. This business model is unsustainable because if you replace lending to small businesses with lending to the low paid staff of small businesses you end up with making loans that will never be repaid because working capital is what keeps small businesses going and losing it means that we will lose many small businesses which in turn will lose their employees who will be unable to repay any personal borrowing that they have incurred.

In these circumstances every bank customer has to decide (a) whether it is sensible to keep their borrowing with NatWest in these circumstances and (b) whether it is sensible to keep long term savings with NatWest. Personally the advice of Polonius should be kept close to everyone’s heart.

Beyond those personal decisions there is a decision for the government. The prospects of any economic recovery are greatly hindered by the NatWest’s behaviour. The NatWest and Royal Bank of Scotland Group is owned by the government and if this is the policy of the bank it is about time that the shareholders stepped in and changed it.

 

 

 

2 Responses

  1. Your story is a good example of parasitic behaviour. The best parasites feast but don’t quite kill the host until another host comes along.

  2. Here is a perfect example of a slow death strategy and manufactured declinometeric model towards an electronic batton, decimating society by design, using the imaginary to rule over ones physical labour.

    All such small bussinesses should remove said cash and keep it real and in house, not leave it in the bank and imaginary, this removes the goalie and posts for the teamsters.

    The way out of the trap is to place all personal/assets or wealth in a second party, so the theives cannot forecloseon the home base.

    In these robbery baron times, its sometimes best to split up the manufacturing base if one can, so as to prevent the entire being dissassembled, use your real life skills to compensate for these withdrawal techniques, and cease feeding those that are bleeding the paradigm dry, otherwise you will end up needing a stronger does of Prozac.

    Even if it means going it alone, start working together on a cash only basis and help other competitors to keep at least one avenue alive.

    As the physical is slowly bled away from the paradigm, the more control the imaginary has to arm the journey towards true slavery, think this is not what is happening then its to wake up, each paper promise that is removed, it will never be seen again, until there is only imaginary. a Highlander model and takedown over again.

    Once we hit 90% digital its all over.

    The seige is well under way, the starvation of reality is starting to take hold be noticeable.

    An example of what is coming around once again.

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