Did banks make good businesses go bust?

25 November 2014

A recent Panorama programme looked again at the accusations that the banks pushed good businesses into insolvency when they should have been supporting them.

Various business owners recounted how they were put into the Business Support unit of Lloyds or Global Restructuring Group at RBS and were treated far from supportive, with the banks simply putting up charges significantly or withdrawing overdrafts. The actions understandably put extra pressure on the businesses so in many cases they closed.  

However, were the banks simply pricing in the extra risk that these businesses would not be able to pay back the loans?  The problem is that some of the practices do look like there were conflicts of interest. Especially where other parts of the bank were trying to buy businesses that were put into administration, that were supposedly being supported by the bank in the first place. Where the valuation of properties was concerned, there were always going to be differing opinions between what the owners and the bank thought were fair.  

So far, none of the cases have been proved in a court of law but a business owner who has lost his/her business is unlikely to have resources to take the banks on.

Further problems have materialised for RBS as they have had to admit they did not give accurate evidence to the Treasury Select Committee following the findings of the Tomlinson Report.  They denied that the Global Restructuring Group was a profit centre, so did not profit from the fact that businesses went bust.  The Bank of England subsequently found that it was indeed a profit centre!  All this does not really look good: www.cityam.com/1416804932/mps-blast-rbs-dishonesty-over-help-small-firms

If your business is involved in litigation with your bank then we can help relieve cashflow pressures by using restructuring tools such as time to pay deals or CVAs.  The banks are not bound by these measures, as they are secured, but they should help prevent them exercising their right to appoint administrators if the company is in a better position financially as a result.  

Alison Loveday from Berg solicitors, who appeared in the programme, will be speaking at our Manchester office opening party on the 2nd December 2014