Banking... the business with different rules

This particular topic has been bubbling under wraps for a while, so I suppose for those of you reading this blog, I give you a health warning: rant coming!

It's interesting to see how the banking industry seems to have a law about running a business which follows one guideline if they are the ones lending the money or investing etc and then a completely different rule book applies when they are the business. What is worse that governments worldwide are buying into this .... (very hard not to use very harsh words) charade.

When a private enterprise comes into troubled times for economic or internal reasons, the first response is to start looking at cutting costs, streamlining the business, enforcing leaner business processes, selling of stock and assets to generate cashflow, and selling to keep liquidity in the business and stay in business, because when you go to your bank for support your bank manager (who has never run a company in their life) will tell you you are too risky for them.

When you are a bank (which has made 6billion in profit just 6 months ago) and you face difficult times, you keep paying your people exactly the same amount, assets are guarded and oh no we definitely don't do anything to keep money flowing, quite the contrary you charge your customers more for basic services, you increase the length of time to clear their money (so you can benefit from the interest in clearance), and yes as a best resort, let's go crying to the government for a comfort blanket.

This really does not make business sense????????

What is worse though is that governments are falling for it, rather than forcing a bit of their own dose on the banks. A lot of the banks have building etc, why not sell them off? That's what they would do if it was a private business. Why not send turnaround managers in to tidy up the mess and really cut down on inefficiency and over-management? Why not have the bank go for funding from other private sources, which is what they force most small business to do? What is very clear is that this industry has been working on flawed procedures and paper based security with no real value, if we came to the bank with that kind of business plan, they would laugh us all the way out of their doors. So why do we have to accept that our governments are falling for this stuff?

Personally I don't understand it. Maybe if a bank can no longer fund their business they will just have to go down, just like private businesses do. A lot of businesses will survive if they focus soon enough and restructure, they rarely survive by handouts. The problem in my view is that a lot of management in banks wouldn't have a hope of surviving in private business, hence they hide behind non-decision and this climate screams for decisive action and calculated risk taking.

We should learn from the charity model, we know that sending money as a solution is not the solution, but teaching people to help themselves is more likely to be successful long term. Banking officials and boards should be sent to business basics classes and forced to implement the learnings as a matter of urgency. The question remains if they are the people that got the bank into the mess, are they then capable of getting them out of the mess? Unless they are teachable and decisive, they should get out of the way for competent turnaround professionals.

When I work with start-up businesses, my first question would be what is the purpose of your service? Tell me what is the purpose of a bank.... is it a depository for money, a lending facility to create more money, is it something more obscure or is it about providing an essential service? More and more businesses are forced to go into trading and bartering agreements, because money is not flowing in the economy and the biggest culprits are those that claimed to have big profit only 6 months ago, i.e. the banks.

Don't get me started on their services, a simple transaction of lodging money from one account to another is not possible in real time, add a cheque into the equation and it takes between 3 to 5 days, now in this day and age of automation you cannot tell me that it isn't possibly in a matter of minutes to check whether money is in sufficient supply in one account for it then the arrive in the other a few minutes later even between banks, surely that is a matter of IT rules?
But when a direct debit presents itself for payment in your account, you needed to have had the money there at 7am the day of the presentation or else it will be bounced, even if you rectify the funding within a working day, so as a bank customer you need psychic ability and when questioned bank staf will hide behind the rule book. Explain how that is reasonable and not a double standard? When it's in their favour it takes up to five days, when my name is on the line I don't even have a business day to sort something out.....

Then bank branch staff are under the same pressure to sell their products, even so much so that they will talk to you in a quite condescending manner as to how their job is secure and that you should really have income protection, but you can't really afford it. It's frightening to see how desparate they are to sell, but when it comes to accomodating the other way there is absolutely no leeway.

In my opinion it's time to make the banks as an industry review their working habits and let them jump the hoops they have put all the private enterprises through over time. If you make bad decisions, you suffer the consequences and if the governments are the enablers for continued bad practice and well below par service then it's only a matter of time before the same problem occurs again.

Why is that our politicians don't see it this way, they all seem to be too happy to help the banks out, is it just me, am I missing something?