View from the train thinking about bankers!

24th March 2012

When it was positively hot a week or so ago – I grabbed an hour with my daughter on a bench in Regents Park where we ate a sandwich and watched the offices empty out and come for a hour’s sunbathing! I was down there to host a meeting with the Agricultural Directors of the UK Clearing Banks and it was a fascinating discussion. It also coincided with Roger Martin-Fagg’s most recent economic forecast and a short piece on the Today programme about the challenge of small businesses in the UK getting sufficient cash flow. I certainly felt swamped by banking!

I guess that I must swim in the lower depths of the pond since all the bankers I know are mostly nice people who get on with doing their job and get paid a sensible salary. It was very interesting to hear about how their job appears to be getting more difficult as they get tied up in more and more regulation, and trying to achieve the necessary ratios to keep the authorities happy about their balance sheets – this has all happened, of course, because for some of them in the past, their boards made some really lousy business decisions. Their credit teams are being scrutinised in more detail, and as a result are parcelling everything up into more “defined boxes” – my impression is that this seems to make the job of the poor guy on the ground – who you and I interact with, more and more difficult. At the end of the day, you just want to borrow the money for the farm business – a simple task you might think! However, of course, the farm business today can include not only land and food production, but an increasing amount of value tied up in residential, commercial property, offices, renewables and various other diversifications. This “box approach” seems to be stifling innovation and taking away the skill of the guy on the ground in deciding what is a good and a bad risk. The other message that seems to be coming out loud and clear is that the margin on lending will increase as the supply of money within the UK tightens even further over the next twelve months.

In his latest update, Roger Martin-Fagg highlights the stark contrast between the UK and US banking systems. Across the water, 50% of their banks are local community businesses that service a niche market and focus very hard on the risk of each individual lending proposition. They have to do that in order to survive, but as a result their individual judgement and flexibility seems to be stimulating rather than stifling economic activity. He cites the only bank within the UK with a similar culture is Handelsbanken. This seems to be an interesting gap in the market?

So that set me thinking about our clients, about half of whom want to borrow money and other half actually have surplus cash that is earning a pathetic rate of interest. Surely it must be possible to bring them together and introduce them – after all, they are in the same industry, talk the same language, understand the issues and, therefore, the risks. Or perhaps that is just too much hassle and risk? I don’t know, but what I am sure of is that if we don’t continue to look outside the box in order to find the solutions, life will just become increasingly difficult.

If you are into the concept of farmer to farmer funding or would like a copy of Roger Martin-Fagg’s latest economic report drop me an email at

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