An Investigation Into a Bad Bank

Lending by banks is a bit like umbrella lending; when it starts to rain the lender takes the umbrella back; what RBS seem to have done is reverted to the lending practices that prevail in the undeveloped and developing world; when it starts to rain not only does the lender take away the umbrella, but also takes away the borrowers clothes off his back and the shelter in which he lives.

Yesterday, after I wrote about bad banks and the rather disgraceful behaviour of RBS against small businesses, RBS announce that it had appointed a large firm of solcicitors to enquire into these allegations.  This is a time honoured gambit. After a large institution has been exposed in some mal practice, (sometimes illegal or simply highly immoral) the institution will try to deflect criticism by appointing a large firm of solicitors or accountants to investigate and report.

In this case the appointee is Clifford Chance. They are a very large and very famous and very expensive firm of solicitors based in the City of London. I should declare an interest when writing about solicitors and Clifford Chance; first I am a solicitor and secondly I played centre forward for Clifford Chance (then known as Coward Chance) in the 1970s.

I have read Mr Tomlinson’s report about RBS’s conduct. It is clear that although Mr Tomlinson may be very wealthy now, he has had the experience of running a small business. This experience is vital to those who are to investigate the practices of RBS in relation to small businesses. I do not see that Clifford Chance have such experience. They do not act for what we would think of as small businesses and operate their own business with the depth of resources which are not available to small business men and women, no matter how many hours they work.

I would be surprised if this enquiry would get to the core of the problem, which revolves around the way in which people have to run small businesses and the decisions that they must make, which are quite different, in character and kind, from the way in which multinationals and the very wealthy businesses that Clifford Chance usually represent are run.

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