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LIBOR: the two syllable acronym that says it all

11 July 2012

 

Few acronyms are as apt as LIBOR, pronounced LIE-BORE. Repeated banker's lies are a bore to every honest citizen. Let's remind ourselves how critics assert they got this unenviable reputation? Through a coiling miasma of mis-selling, that's how. They mis-sold mortgages and helped to fuel a global recession. They mis-sold PPI and continue to pay the price. They mis-sold interest rate swapping and the recriminations are just beginning.

Libor is one of the bedrocks of our financial system: residential mortgages, company loans, deposits, inter-bank borrowing, and derivatives are all based on it. On 16th March our blog 'Definition of an SME: Small, Medium and Excluded' implored business secretary Vince Cable to use his political clout to get the banks to help SMEs. Libor appears to have strengthened his resolve to do so; or at least it has increased his rhetoric.

Cable told the BBC's Andrew Marr show (08/07/2012): "The banking culture is anti-business; it doesn't focus on the long-term. It is throttling the recovery of British industry because companies cannot get loans to expand their business." Hallelujah and thank you Mr Cable! And, the opposition is getting in on the act too, with Ed Miliband calling for 'more competition' and Ed Balls wanting 'root and branch' reform.

Meanwhile, SMEs wait for the money. It's not just the banks that have short arms and long pockets. As suppliers, SMEs too often find themselves waiting to get paid. Big businesses are all too often the culprits, as John Walker, national chairman of the FSB can testify with 75% of his members experiencing late payment. Once again we can look to the Government to improve the situation, this time with the Prompt Payment Code. To date, 25 of the FTSE 100 companies have signed the code, a voluntary undertaking to pay suppliers on time.

The code once again unites political parties with Labour MP Debbie Abrahams saying: "In the current climate I cannot imagine why a multi-million pound company with a healthy balance sheet would not be prepared to lead by example and sign up for the code." Phil Orford, chief executive of the Knutsford-based Forum of Private Business agrees: "The code asks nothing more from responsible businesses than to pay suppliers as and when agreed, without changing terms and conditions retrospectively."

Libor has over-stepped the mark; an action that demands a reaction. If its aftermath should trigger better access to finance and improve the flow of credit, then it will leave a positive legacy few could have imagined. Not least among SMEs who hold the key to growth and prosperity.

(ct) 

This entry was written by Gordon, posted on 11 July 2012 Bookmark the permalink. Follow any comments here with the RSS feed for this post. You can post a comment.

1 comment for “LIBOR: the two syllable acronym that says it all”

  1. Gravatar of Simon HarrisonSimon Harrison
    Posted 31 July 2012 at 16:46:46

    It is concerning at the current time how big businesses can strangle SME's, which you are right in pointing their potential for growth and the associated importance of SME's, threatening their existence due to cashflow pressures. Cash is so important to the survival of SME's and any bottle necks are often fatal for small and medium sized companies.

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