«Don Solvent Entrepreneur (E. S.) must renew a credit policy of your company ERE, S.A. on its usual bench, the Molculo Bank. The amount is €1 million at annual Euribor +1.5%, which had always been guaranteed with the company's own buildings and installations. ERESA, valued at almost double that amount. The company has reduced its workforce in 2008 and 2009 (as the more astute among you will have already guessed), but it is still standing with a dignity envied by most. With much reduced profits but without losses and with good prospects of a merger with another company in the sector, a strategic alliance that would leave the group in a position of clear competitive advantage. The current circumstances and prospects are, therefore, among the best that can be found in the business world today. In other words, a good old-fashioned bank customer.
Well, Don E. S. cannot understand why this year, his banker and friend S. M. (Soyún Mandao) explains to him that the conditions have been tightened due to new management in the bank's risk department. For the renewal of the policy, the bank is demanding collateral for the warehouses, installations, machinery, the fleet of trucks, the adjacent land, the not so adjacent land and his personal villa. A total value, which even in this day and age, more than quadruples the €1 million policy to be renewed. But that's not all, the rate to be applied for the renewal of the bloody policy is now 7%! (they are ashamed to index it to the Euribor and round it off by hand).
Solvent Entrepreneur cannot believe that the Molculo Bank, its long-established bank (although a few years ago it was called Muntiro Bank), is doing this to him. Y I am only repeats the assigned mantra: «I'm sorry Empren, The risk managers have become inflexible, there's nothing I can do. Many are not even being given the option to renew their policies... You know what it's like, what can I tell you».
Finally Empren (he's almost like family now, isn't he?) manages to return the policy within the deadline to the Molculo Bank, that this is the end of its commercial relationship with ERESA. Surprisingly (or not), however, he maintains his personal relationship with I am, The Solvente and the Mandao have even been spending their summer holidays together for years.
This is just a humorous example of what today's hard-pressed banks are doing. Due to the inability to release asset operations with customers in the red, they have no choice but to release ballast through solvent customer debt. In other words, they mistreat solvent debtors to the point of forcing them to transfer their credit operation to other institutions. It does not matter how solvent or profitable this good customer has been, is and will be in the future. After all, what bank today cares about the future? A few months or years ago, a customer like our friend Solvent Entrepreneur, was a treasure for any entity. And yet today the priority is bailing water and coefficients, balancing balance sheets and defaulting on payments by hammering. In short, surviving at the cost of whatever.
It has always been said: «If you owe the bank 1 million, the bank has you on the hook. If you owe the bank 1 billion, you are the one who has the bank on the hook.«. Well, it is clear that this maxim is an understatement. And today, the banks are not only caught not only by the debtors of 1 billion but also by the defaulters of small and medium-sized mortgages. It is the power of the anthill next to a large, seriously ill and dying prey.
That's how bad banking is, gentlemen. Of course, this doesn't happen to one's own bank, it always happens to other people's banks, whether or not they are in the list of the downgrades massive.