Bankers lost the game by taking their eye off the ball
In 36 years in the business, Willie John McBride was one of the most renowned of Ulster’s bankers.
Somehow, there seemed a natural synergy between the strong, reliable world of banking and the solid frame of McBride, one of Ireland’s most doughty rugby players.
But today, 16 years after he took early retirement from his post at the Northern Bank in Ballymena, McBride remains a bemused onlooker at the chaos into which the banking business has descended.
He pinpoints one specific area where the banks laid the seeds of their own downfall. The devaluing of local managers as a link between financial lending houses and the community was, he says, an absolute disaster.
“I think I’m right in saying this idea of not having local managers, of devaluing their role, originated in America,” he said. “They reckoned the salaries they were paying managers was too high and besides, so their argument went, it would be better if lending was done through a central body.
“That was the basis of all this. Managers were paid off, most of them guys over 50. But they lost the good guys, those with all the experience. They got rid of the wrong people.”
The loss of this sheer commonsense service, traditionally a much-valued link between the community and its local bank, was highlighted earlier this month when businesswoman Carol Hack, who wanted to develop holiday homes for a scuba diving centre, revealed the Yorkshire Bank had suddenly withdrawn its previously agreed entire £1.3m funding for the project.
In the end, Hack found alternative funding from a Swedish bank and she says the methods they used were an echo of those employed 30 years ago in British banking but recently destroyed by the big UK banks. She said: “The people at the (Swedish) bank came out to see me and they liked the look of the business and made a personal value judgement.”
But what is the link between the local bank managers whose services were dispensed with, and the crash in the world’s economies, caused by bad debts ? McBride insists it was the loss of people at local level that undermined the entire system.
“Prior to that system being disbanded, one of the great things in banking was the personal relationship between banker and client.
“It was nurtured through the years, handed down from one generation to the next. The client could pick up the telephone, talk to his bank manager and say ‘Can I come and see you’? Either he did that or you went out to see him. That was even better because you could see with your own eyes what the problems were, or whatever. The thing was, there was that contact all the time.
“The strength of the system was, we local managers usually knew all about those who wanted to come in and talk about loans. And if we didn’t personally, invariably we knew someone who knew them. It meant that we knew their background, knew whether they were credit-worthy, trustworthy or whatever.
“If they had financial problems, we would know about them. We knew whether their businesses were doing well or struggling. In other words, bank managers understood what was happening in their own communities so there was, in effect, a control at the very base of society.
“But when so many of those local managers either took early retirement or lost their jobs, that link was broken and all that valuable knowledge was lost.”
McBride bemoans, too, the arrival into the banking business of career businessmen, very often with little or no experience of banks. “What really shook me was that we had four guys sitting before the House of Commons committee, one of whom was Sir Fred Goodwin, former head of the Royal Bank of Scotland, who got a retirement pension of £750,000 a year.
“But of the four bankers who went to that meeting, none had any banking experience. In my day, banking was a career. I remember in my final days, they said they wanted to get rid of most of those over 50 because their salaries and upkeep was a drain on the bottom line. They told us they’d be bringing in graduates who were cheaper and would be friendly, people orientated. Only trouble was, graduates don’t have experience of banks.” McBride blamed the current crisis on the fact there was no monitoring or control when it came to banks.
“The banking institutions let it go haywire, the Government let it run away. They must have been aware what was happening but no-one was supervising it. The lack of control over credit and lending was frightening.
“Profit became the big thing — profit, profit, profit. And profit today, not tomorrow.” McBride is also fiercely critical of the way banks changed the nature of their business. He claims they became chiefly a selling institution, trying to tempt customers with mortgages, personal loans and even insurance. “That wasn’t banking as I knew it,’’ he said.
“Money became so accessible that the financial institutions were lending to people who should never have been borrowing money at all. It became completely mad.
“The banks were saying to their staff, we are setting targets. We want you to sell so many personal loans, insurance policies and mortgages this month. So the people responsible for those targets were lending money to people that couldn’t afford it; vulnerable people. And this was the way so many people were brought down.”
What is McBride’s over-riding emotion now when he surveys the chaos that derived directly from these policies?
Sadness is probably the best word to describe his feelings. “When you look at the debts of a bank like RBS, it is frightening. But it is society and the families who have become involved in all these debts that I feel saddest about. This is the end of many people’s dreams.”
It will come as no surprise that Willie John McBride, a man who has lived all his life adhering to a set of principles and self regulatory rules of life, advocates a return to such principles, not just for society but businesses such as banks. Everyone, he says, must return to more prudence and self control. He is now 70 and confesses bewilderment at certain unarguable facts about life circa 2010: poverty is rife, debt is omnipresent and greed is rampant.
“The trouble is when you live like this, there is always a day of reckoning. We have got to get back to prudence and common sense.”