Allan Massie: Today’s antisocial bankers are living in another world

LAST weekend I went to the always-delightful Wigtown Book Festival. Since Wigtown is ill-served by public transport, the festival relies on a host of volunteers to collect speakers from distant railway stations or airports, and I was, as usual, met at Dumfries. My driver was a retired bank manager. He had been happy to take early retirement some years ago, when he found that the nature of the job had changed from providing a service to acting as a salesman. He illustrated the change with a little story.

On the day of the annual audit of his branch, a farmer called to draw money to pay wages. As usual, they had a cup of coffee together and chatted about this and that for a quarter of an hour or so. When the farmer left, the auditors asked the manager how much he would be charging this client for his time. “Well, nothing,” he said. “You must charge him £30”, he was told.

The manager was taken aback. He explained that the farmer was one of their best customers. The bank handled a lot of his business. A short conversation over a cup of coffee was not just an act of friendship; it was also a means of maintaining good relations. “If I start charging him for my time, he’ll be offended and may take his accounts elsewhere.” The auditors were not impressed, and insisted that all the manager’s meetings must be costed and charged for accordingly.

The old-style bank manager tended to stay at the same branch for years. He got to know the bank’s clients and know who was creditworthy. He saw it as his business to be on hand to offer advice. He had a degree of autonomy and made decisions on the basis of his own judgment.

If the branch was in a small town, he was a figure of some standing in the community and was treated with a respect which he had earned. His might be a branch of a national bank, but in a sense it belonged to the community, and it was there to serve the interests of the community, not just to earn profits.

It might be an exaggeration to say that this has all changed, but there has been a considerable change. Providing a service seems to come low in the scale of priorities, and small businesses find that decisions affecting them are made by computers, not people. Does this make for better, as distinct from more profitable, banking? It seems unlikely – certainly if you believe that the bank should serve a social purpose.

At the top level it no longer appears to do so. This is why the word “banker“ has become a term of abuse. Bankers are seen as greedy and rapacious, inhabitants of a world remote from ordinary experience. Perhaps this is unjust. Yet the behaviour of the banks seems to justify this common opinion.

A report in this newspaper last week caught my eye. The headline read: “£2.8 million ‘hello‘ for latest Santander recruit to Lloyds”. The new head of retail banking at the Bank of Scotland was being given what you might call a “signing-on fee” – just like a top footballer moving clubs, except that hers would be in the form of shares to be given over a three-year period, and in part determined on performance. (Performance targets can, of course, be set in a way which ensures they will be hit).

The signing-on fee – there was no mention of the salary, which is doubtless considerable – was said to be a replacement for the benefits forfeited as a result of her resignation from the Santander Group. Lloyds, parent company of Bank of Scotland. is, of course, 41 per cent owned by the taxpayer.

Reading further, one learned that the recently appointed chief executive of Lloyds, Antonio Horta-Osorio, was himself “welcomed with millions of pounds in shares and pension payments in addition to his annual pay and pensions worth a maximum of £8.3 million.” Nice work if you can get it.

Now, quite clearly, being chief executive of Lloyds, or head of retail banking at the Bank of Scotland, is a big job, and bringing the bank to the point at which the government may sell the public’s shares profitably is important and no doubt difficult. Yet figures like those quoted are eye-watering. These people are, after all, employees; they are not entrepreneurs. They risk nothing themselves. At the moment, indeed, they are in effect public-sector employees. Are they worth all this money? Or might the job be just as efficiently done by someone paid a lot less?

The answer to this question is almost certainly “yes”. At least that would be the answer in a sane world (but then, in a sane world, English Premier League footballers would not be paid what they are paid). What has happened, or seems to have happened, is this: there is a cartel of bankers – not a formal cartel, but an informal one – who have managed to establish what is the going rate for the job. And the going rate is a rip-off of the public in the case of the nationalised or part-nationalised banks, and of the shareholders in those which remain independent of the State.

The going rate established, the informal cartel sees to it that you can’t hire a banker for less than that. Worse still, the informal cartel ensures that even a banker who fails will depart with a handsome pay-off. In the world of grossly inflated wages, even the losers win. Sir Fred Goodwin may have led RBS to the gate of the knacker’s yard, but Sir Fred will never be a poor man.

Looking at the record of the banking crisis, your average man thinks that a spot of humility on the part of bankers might not be a bad thing. Sackcloth and ashes, the ducking-stool or a spell in the stocks or pillory might seem appropriate. Clearly, the average man is a fool, and the proof is that nobody is going to offer him a £2.8m signing-on fee. Meanwhile, the top bankers continue to rake it in. Heads you lose, tails I win.

As for my retired bank manager friend who believed that his job was to offer a service to his customers, and that such a service did not include charging them a fee for a quarter of an hour’s conversation, he is exposed as hopelessly old-fashioned.

The world has moved on. But has it arrived at a better place? Silly question.