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Business Lending offers alternative to bad bank strategy

Stuart Parfitt of specialist commercial lender Business Lending says the government’s initiatives to promote lending will not work without a much greater commitment from mainstream banks.

He says: “Aside from the fact that they are spending the vast majority of their time managing sub-performing and non-performing loans, the mentality of bank risk managers is one of ‘never again’ or at least ‘not on my watch.

“Remember, these are the people who took once proud banks to the edge of the abyss, stared bankruptcy in the face and they will never forget that, it will take a generation to change the mindset.”

He says banks senior management might publicly support the programmes but they are fully committed trying to deal with the existing mess and restructure the business.

He says: ” Jobs are being shed and morale is in the gutter over the bonus row. Banks just don’t have the management resources to make new lending a priority.”

“The proposed ‘Bad Bank’ idea will help free capital, but it won’t free up management time or change the “not on my watch” mentality.”

“What we need is an independent ‘Good Bank or Banks’. Lenders who would focus on providing new credit in the form of loans to small businesses, residential mortgages or car and equipment finance. Credit, rigorously underwritten on sensible criteria and properly priced, will perform well.

“Mortgage credit especially commercial mortgage loans can be underwritten at much more modest LTV’s than we have seen in recent years and with the additional benefit that values have reduced by almost 50%. Once seasoned, these loans can be recycled into the capital markets in 18-24 months time at little or no cost to the taxpayer. “



If you’ve been whiling away the hours checking out what the stars are up to on Twitter, you may be interested to know that your favourite mortgage magazine has joined the networking site. Yes, Mortgage Strategy is all Twittered up and ready to be followed by those who dare.

Parliamentary debate over FSCS levies kicks off today

A parliamentary debate is taking place today looking at whether building societies are having to pay too much of the cost of compensation for Bradford & Bingley and other failed banks.The Building Societies Association has already warned that hefty levies to the Financial Services Compensation Scheme could cause many societies to fall into the red.The […]

Now more than ever, we need to back the small developer

In the context of the current housing deficit, the latest housebuilding stats aren’t great. But what does doing better look like? The Department for Communities & Local Government published its latest figures at the end of August, which revealed that housebuilding starts in England rose 2 per cent in Q2 compared to the previous quarter […]


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