BANKS - SMOKE AND MIRRORS

2014, heralded the start of a new year, post GFC (Global Financial Crash). Banking spin has been ratcheted up a notch and if you believe all you hear, we’re on the right track.

In Dublin, the Chief Executive of AIB has told us that the arrears issue will be resolved in two years. In Belfast, a report this morning tells us that there is no demand for credit. So what are we all complaining about?

The truth is that we are fed up being offered ill-conceived ways to reconcile the arrears problem and after five years of being continually refused credit, the majority of people have given up.

David Duffy tells us that the issues of loan arrears, capital adequacy and profitability will be resolved in the Irish Banking Centre in the next two years. The pillar banks will return to profitability during 2014-15 and will be able to pass any stress tests. Great news! Great news for the banks.

AIB are throwing around ten year, zero coupon bonds like confetti at the moment. Sign up to these, comply with the terms and conditions and an amount of your debt will be written off in ten years’ time. I’ve seen many of these ‘bonds’ with six figure sums involved. AIB are compounding as much of the arrears as possible into the existing mortgage as allowed by the reasonable living expenses. The balance is set into the ether, with a sum maturing in ten years. Think of it as a ten year hangover, you’ll feel groggy and not really sure what’s happening for ten years and then the real headache will kick in. You’ll have to immediately repay the amount of the bond.

It makes no sense to anyone other than the bank. It relies on property prices increasing, interest rates not rising and your economic, personal and work situation not deteriorating. They must have a new crystal ball at AIB, as I couldn’t guarantee any of those for you. In ten years’ time, if you are unable to repay, the bank will enforce all of the debt, repossess the house and get a judgement against you. All this after you have been paying on time for ten years. The banks will no longer be under the scrutiny of the Troika, the Central Bank and their balance sheets will allow them to be more aggressive and do as they will. You will be on the scrapheap. To suggest that the arrears issue will be resolved in two years when your own bank is wilfully kicking the can down the road ten years is spin of the highest order.

In Belfast, the Banking Enquiry up at Stormont is drawing some strange testimony. Granted only two banks have given evidence but both would suggest that there is money available to lend. The banks in NI are now saying that the country has a competitive banking market and supply of finance was not the issue. Sorry to be so sceptical but how many customers form part of this enquiry and how many have the banks seen in the past five years. I’m guessing the answer to both is not many. These findings in Northern Ireland contradict those of the Entrepreneur in Residence with David Cameron’s government, Mr Lawrence Tomlinson, who did by chance speak to a large number of bank customers in 2013.  He would have a very different view on this subject matter.

Who should you believe? I’ll let you know in an hour, I’m off to AIB Bank centre to get my palm read, before boarding the train to Belfast to get a loan.

It really is time to take back control, ask questions and challenge what you are being told. Banks are ticking boxes more so than ever before in the past and what is good for the banks is not always good for you.