Much has been written about the problems experienced by small businesses dealing with UK banks at the moment. Banks have been driven by the banking authorities to improve their balance sheets, therefore it has been difficult for small businesses to obtain finance – either in the form of overdraft facilities or business loans. I suppose, however depressing it is for small businesses to cope with a hostile banking fraternity, there is a degree of resigned understanding that you cannot on the one hand publicly upbraid banks for not lending, whilst on the other hand instruct them to reduce their loan exposure – well unless you’re the Prime Minister.
But I’ve got a different take on the whole issue of bank-client relationships based upon my own experiences and those of colleagues within the business world. When it comes to indifferent, lackadaisical and couldn’t-give-a-damn incompetence, I cannot imagine a more user unfriendly bunch of people to deal with than your average British bank (well perhaps Spanish banks but that’s another story). This has nothing to do with the aforementioned problems of getting a loan; this is about the shear aggravation of trying to get your friendly bank to carry out seemingly simple tasks like opening an account – oh dear, have you tried to do this recently?
So here are my lessons in dealing with the modern British bank, with examples from true life experiences. In many cases I find myself driven to quote Littlejohn of the Mail – you couldn’t make it up.
Opening a corporate bank account
The first and most important point to fix in your mind is that, if you’re a small business (SME), banks do not want your custom. They are systemically opposed to having any dealings with SME’s and will use every endeavour to encourage you to just go away – take your custom elsewhere. But of course you can’t because you must have a bank account and all the banks are equally as bad.
So in what ways will the bank you approach attempt to drive you away?
You will no doubt visit the website and try clicking business accounts or similar thinking that this should be fairly straight forward. Quickly you will find that your particular circumstances do not fit the ‘norm’ (I suspect that a lot of thought goes in to creating a template that 99% of applicants will not meet) and you will need to phone. The person you will speak to will have been carefully selected to ensure that they have absolutely no experience in setting up a business bank account. Eventually you will be asked to fill out forms and provide all the personal details of all directors and owners, who will be required to visit their local branch to have proofs of identity verified (peered at). Try doing this if any of your directors or owners (they may not be the same persons) are not British citizens or are domiciled abroad.
In this process you will experience;
- Forms being misplaced at least once.
- Signatures being rejected for spurious reasons.
- Branches failing to send on proofs of identity which get lost.
- Request to repeat the whole process at least once.
This whole process will take at least 6 weeks, probably longer. However, it appears that not everyone experiences these problems. There was recently a case widely reported in the newspapers of a posted cheque made out to a firm of accountants being stolen in transit, presented at a bank by the thief who opened a business account in the name of the accountants, deposited the cheque and subsequently withdrew the value in cash – all over the counter over two days. Opening a business account quickly and easily can be done then – just not by you.
I was recently commissioned by a non-British (European) medium sized company with sales of over £100m to assist in setting up a wholly owned subsidiary in England. Incorporating and registering VAT and PAYE was simple and efficient (well done Companies House and HMRC). The subsidiary, for technical reasons, needed a stand-alone UK bank account. With a projected turnover rising to £5m plus by the end of year 1, you would think that banks would be falling over themselves to get the business – wrong. One major bank turned the business away because foreign ownership was too complicated. Remember this was a respected company in an EU country. Another wanted the personal details of all shareholding owners of the parent company – this was a Plc. equivalent company with hundreds of shareholders. We set up the account in the end, but the distinct impression was that we had achieved this by exhausting the chain of obstacles put in our way.
Welcome to your Relationship Manager.
As a valued business customer, you will be assigned a ‘Relationship Manager’ – a highly experienced senior member of banking staff who is there to smooth your dealing with the bank, to get things done and to make sure that any and all of your banking requirements are met quickly and efficiently. He/she will come and see you at your offices regularly to ensure everything is going well in you dealings with their bank.
Er, I’m afraid not. First of all, your Relationship Manager will be a 16 year old boy or girl (well OK, perhaps 21) who has much less knowledge than you do of how banking in general and his/her bank in particular works. They will have absolutely no idea of how to execute anything on your behalf and will generally be treated with indifference bordering on contempt by the various departments in the bank you need to deal with. They will never, as a point of principal answer the phone and will never return a call and as for coming to see you at your premises – unfortunately it’s not in the job description, of course it may be that they’re not old enough to drive.
Changing anything – bank mandate for example
Any change to your details, in particular changes to directors or account signatories, will require a mandated change form. This is in principal fair enough; it ensures that a bank complies with the properly constituted wishes of the company as authorised by the Board. But do not assume that this will be a smooth and efficient process. In addition to all of the requirements of verified proofs of identity and the three things that will go wrong I listed under ‘opening an account’ above, there will be a few other manufactured reasons for rejection of such a mandate.
The most bizarre I encountered recently, in fact with a charity wishing to change its Board of Trustees, was an insistence that the signature of a trustee on his passport did not match the one on his mandate form. In my telephone conversation with the bank’s mandate department representative I commented “the signatures look the same to me, are you a graphologist then?” to which the response was “what’s a graphologist?”
It took me a year to get this mandate change executed.
In summary, as an SME, it is best to assume before any dealings with the British banking industry that you will encounter all of the attitudes I set out above; indifference, incompetence, hostility. That opening and running a bank account will be difficult, slow and frustrating. That your Relationship Manager will be as helpful as a fur coat in the Sahara.