Signs that the banks are beginning to go straight

BANK bashing has become a national sport of late. The title of Cathy Gunn's book, High Street Robbery: How the Banks Hold up their Customers, indicates that the institutions we all love to hate are in for more grief.

Ms Gunn comes down firmly on the side of the small business and personal customer. But she does not portray the banks as totally unfeeling monsters. She finds that clearing banks have been slow to respond to customers and slow to admit that they may have made mistakes.

On the debit side, banks have failed to adopt the view prevailing elsewhere in the high street that the customer is always right, and have acted in a high- handed manner. Reform has often been driven by powerful external pressures. The adoption of codes of practice to govern dealings with small businesses came only after it was demanded by the Chancellor, Norman Lamont, supported by Sir Gordon Borrie, then Director General of Fair Trading.

On the credit side, Ms Gunn detects signs of change. Banks now recognise that they have got it wrong in the past and must try harder to understand their customers.

High Street Robbery is an examination of how banking practices developed in the 1970s and 1980s to produce the explosion of fury by small businesses in the early 1990s.

The starting point is the tale of Ashley Mote, the aggrieved small businessman whose letter to the Sunday Times unleashed its campaign against the banks two years ago, which culminated in Mr Lamont calling in the heads of the big four clearing banks.

There are plenty of harrowing tales of extortionate interest margins, overcharging, failure to explain or communicate and lack of sympathy and understanding. How about the pounds 66 charge for an unauthorised overdraft of 72p for two weeks? No wonder customers are cross.

The big question is: will it really improve? Ms Gunn quotes bankers promising more and better relationship-banking. She quotes consultants on how to keep bankers sweet and entrepreneurs on the dos and don'ts of dealing with banks.

She also airs government worries that recovery from recession may be stifled by cautious lending and the fall in value of property against which bank loans are secured. She concludes that if banks want to improve their battered image, their chance lies in helping to revitalise the UK economy. But do they have the imagination?

'High Street Robbery' is published by Smith Gryphon on Thursday at pounds 15.99.