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Banks and insolvent corporate customers: experience of the rescue culture

online resource
posted on 05.04.2006, 17:28 authored by Keith Pond
Over the last twenty years UK banks have reviewed and streamlined traditional credit assessment techniques for Small and Medium Sized Enterprises. In pursuit of margin and market share, today’s due diligence relies increasingly on centralised data and statistical “certainty” than on the more qualitative approach of the local bank manager. During this same period the nature of the banks’ “safety net”, the sanction of insolvency proceedings has changed too. The effect of this is not only to increase the potential for recovery, in respect of bad debts, but also to increase the moral hazard problem. However, increased risk is masked by creditor power in recovery situations. This paper draws on theoretical and empirical research from legal, ethical and economic viewpoints and suggests that a reappraisal of this aspect of the banker-customer relationship is essential to restore trust, prudence and long-term profitability.

History

School

  • Business and Economics

Department

  • Business

Pages

51131 bytes

Citation

POND, K., 2004. Banks and insolvent corporate customers: experience of the rescue culture. IN: Gerbel, S., Kaufmann, H.R., Menichetti, M.J. and Wiesner, D.F. (eds), Aktuelle Entwicklungen im Finanzdienstleistungsbereich, 3rd Financial Services Industry Symposium at the Fachhochschule Liechtenstein, Vaduz, pp 79-88

Publisher

© Springer-Verlag

Publication date

2004

Notes

This is a conference paper given at the 3rd Financial Services Industry Symposium, 2004.

ISBN

3790801925.

Language

en

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Keywords

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