Banks finally expose their regional lending performance

Geraint Talfan Davies welcomes new banking data and offers a prize

British over-centralised banks made an interesting move last week – even if under Treasury duress – in publishing for the first time data on deposits by and lending to SMEs by region. It is not difficult to see why the banks were resistant to such a move, since the data showed an overall reduction in lending of £4.56 billion, or 4.35 per cent, while the deposits of SMEs rose by £7.26 billion, or 6.13 per cent.

Amidst the disappointment at the overall figures, there was some comfort in the fact that Welsh SMEs showed the fourth largest increase in deposit balances – £252m, or 7.51 per cent – compared with the average increase across the UK of 4.45 per cent. Only Scotland, the North East of England and the West Midlands were ahead of it.

Bank lending to SMEs decreased in every region of the UK, but Wales had the third smallest decrease – £175m, or 3.47 per cent. On the other hand, Wales was one of only three regions where lending exceeded deposits. The other two were the North East and South West.

The banks have, however, tried to spin this data by an ingenious apples and oranges comparison – comparing a region’s borrowing as a percentage of total SME borrowing, with a region’s share of the turnover of all businesses in the UK. This cannot but put regions that are over-dependent on SMEs, and lack major industries, into a more favourable light.

Still, it’s a start on improving the accountability of the banking sector. But only a start. Danny Alexander, the Chief Secretary to the Treasury announced yesterday that from next year the banks will have to publish data on deposits and lending across 10,000 post codes in the UK. Mr Alexander stated soberly that this would improve transparency and should encourage competition. He was too diplomatic to spell out the consequences.

In the real world such data will provide devolved administrations and local authorities with the ammunition to sharpen their pressure on the banks in their own areas. Who knows, the banks may even have to find new people to take public responsibility for their local performance.

I will offer a bottle of champagne to the first bank to recreate the post of ‘Regional’ Director in Wales, of which we used to have several.

Better still if Danny Alexander were to turn RBS into chain of regional banks, on the lines of the German Sparkassen, as recommended this week by the think tank Civitas, on the back of its really detailed study of the German system. This will not be new to clickonwales readers (See here). Keep hoping.

Geraint Talfan Davies is Chair of the IWA

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