Few other issues seemed to define the essential wickedness at the heart of unrestrained capitalism than the conduct of the banking industry during and after the financial crash of 2008. In the pursuit of riches beyond the imagination of most people, many senior bankers deliberately ruined the lives of millions by selling financial products that they knew had become poisonous. The trick was to fill their pockets with as many bonuses as possible before the game was a bogey. In this world, the concepts of enough money or sufficient funds had long been rendered obsolete: you could never have too much money, nothing could be deemed excessive and there was no such thing as a human cost. It was the elixir of pure Thatcherism.
The financial industry, aided by successive UK governments, Labour and Tory, has since spent a lot of money inducing us to forget how egregiously obscene was its conduct during these years. It has invested in half-truths and outright lies and trusted that its financial support of the Conservative party would assist the process of anaesthetising our memories. The three biggest lies are: that it was mostly about the Royal Bank of Scotland and US sub-prime lending, that the banks are all behaving themselves now and that we still need to pay massive bonuses to attract the “banking talent”. In the banking world, “talent” is never rewarded. What is rewarded is the seemingly psychotic ability to remain impervious to the suffering of others in the pursuit of personal gain. This is the only true performance indicator of the banking industry.
The Clydesdale Bank has evidently taken such behaviour to a new level and today in Glasgow a former businessman will embark on a hunger strike to highlight its treatment of him. John Guidi says the Clydesdale effectively killed his £12m property business and that it is now seeking to evict him and his family from their home. (Not long ago, Guidi was being feted at the Clydesdale HQ for his success in building his business carefully and thoughtfully without leaving himself over-exposed.) The Clydesdale could do this simply by abusing the trust that Scots people have traditionally placed in it. This bank had seemed to go about its business in a less rapacious way than its two ugly sisters, RBS and the Bank of Scotland.
A few years ago, Guidi was persuaded by the Clydesdale Bank to sign up for a series of tailored business loans. Unknown to him, these were simply another of those financial instruments apparently fashioned with the intention of squeezing businesses to the point of destruction before sneaking in at the end to annex the assets and flog them for profit.
The Clydesdale’s former chief executive, David Thorburn, admitted to a House of Commons Treasury select committee that these loans had been discontinued because of the punitive sanctions contained within them. It had the hallmarks of a scam run along similar shady lines to the global restructuring group of RBS, which was found to have deliberately wrecked small firms. When Westminster’s Treasury committee was investigating the RBS global restructuring group, it found a memo with the heading “How to get a customer to agree chunky fees and upsides and thank you for it.” It continued: “Sometimes you need to let customers hang themselves. You have then gained their trust and they know what’s coming when they fail to deliver. Missed opportunities will mean missed bonuses.” But when you have a regulatory body as weak (arguably to the point of being complicit) as the then Financial Standards Authority, these banks know they’re on safe ground. RBS said the memo did not reflect bank policy.
Guidi’s life began to unravel after the Clydesdale entered into a business agreement with an outfit called Promontoria (Chestnut), part of the Cerberus group, which became the unlicensed and unregulated collector of the outstanding loans and securities held on his property and home.
The Clydesdale changed the structure of his loans in 2002, introducing the tailored business loan, which the Treasury select committee has described as mis-selling under false pretences. They were produced on an industrial scale and on terms that few non-banking people could ever understand. In 2010, Guidi started negotiations for a business loan of £1.6m. He drew the first tranche in August 2011 and the final tranche in November 2011. Less than two months later, the Clydesdale called him to say all his loans had been frozen. Guidi said: “This was like the sub-prime banking scandal in America of 2008. Rapacious profiteering and asset stripping had come to town and it took me for everything I had because I missed the fine print. They knew they were getting me to sign up for the ruination of my business.”
The Clydesdale Bank is now part of the CYBG group, which in October last year took over Richard Branson’s Virgin Money for £1.7bn. CYBG claimed the new banking conglomerate would generate savings immediately of £120m a year. CYBG said it could not comment on ongoing legal proceedings, but that it was confident it had investigated Guidi’s case thoroughly.
Banks are licensed and regulated to help their customers. Instead, too many are allowed to prey on the weakest and least-protected while governments avert their eyes. We have effectively allowed the law of the jungle to hold sway in our banking industry.
• Kevin McKenna is an Observer columnist
