Sunday, May 26, 2013

A banker's responsibility

Having helped found two banks (small but perfectly formed and directly aimed at securing financial inclusion for the 'unbankable'), one of the most puzzling aspects of our financial crisis is the assumption that it is debtors who are to blame.

This is most notable in Europe. One of the reasons why Germany is so keen on austerity for the Mediterranean South is that German banks themselves are heavily exposed to Southern lending. Default would ripple through the system upending apparent 'Northern' probity.

It is puzzling because it seems obvious to me that the decision to lend is that of the bank and, therefore, they co-own the responsibility, indeed the responsibility is more gravely their's than the borrowers.

If one of our loans went bad, obviously one's ego (and anxiety) pointed the finger at the borrower. It is their fault, how dare they etc. but calmer reflection brought you back to the obvious point that it was your decision, and reflecting on that decision individually, usually suggested to you that they were signs  intimating that you were going to make a mistake - either in the character of the borrower, the nature of their business or the market in which it sat.

It is a bank's responsibility to be wiser than in its customer in the matter of lending and paying back, that is its presumed expertise, and it appears to be a simple fact we keep forgetting in our crushing anxiety over how to get out of the mess we find ourselves in (and not go back to it when we are finally in the clear).

The old cliche that it takes two to tango (and one is the lead partner) is never more true than here.

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