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Bad business decisions in the past are no excuse to blame banks

Yesterday I received an online trade magazine and it quoted a borrower who demanded that the “nationalised banks” should help him more. The borrower’s financial parameters were described as follows: A Buy to Let investor with 55 properties, capital introduced 15% with a gearing of 85% on past values and he was very concerned that he would not survive any increase in Base Rates.

It seems that the original finance arranged was not flexible or suitable – I am not saying this just with “hindsight”. Clearly this borrower is overgeared and according to today’s stress testing rules would never be able to raise the amount of finance. But in fairness, according to any common sense stress testing (applied even 3 years ago), this type of financial and commercial strategy does not make sense.

So, yes one can blame the bank for being non prudent and granting the finance in the first instance. But equally the lack of prudent lender was complimented by that fact that there was no prudent borrower as well.

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