Continuing my theme of ‘Business owners are from Mars, Bankers are from….’ an interesting article in Estates Gazette this week written by a senior commercial real estate banker. In it he shares that he has a moral problem when he is approached to refinance another banks deal where the applicant is using the refinance to persuade the current lender to ‘take a haircut’ on the outstanding loan.
It is a balanced article but exposes how ethical and moral judgements are also involved in underwriting. Basically he was saying that a property investor/developer who is prepared to do this to a bank reveals a potential flaw in their character and attitude to banks.
Entrepreneurs, and property people in particular, are ‘survivors’ and opportunists. It is what makes them successful and good at what they do. They could also be forgiven for feeling that bankers have misled their own moral compass – and of course in most instances such refinances are being forced by the banks in the first place. Perhaps such property owners are acting on their own assessment of how their existing bank have behaved morally?
Bankers, on the other hand, have their deeply embeded ‘codes’ of lending. It is no coincidence that the traditional mnemonic for assessing a loan is ‘CAMPARI’ and that the first letter stands for ‘Character’. They will assume that someone with ‘the wrong attitude’ to their existing bank might also adopt such cavalier behaviour with them when the going gets tough.
Clearly the lender involved didn’t see anything wrong in sharing his thoughts on the matter with the entire property industry.
Not to say either is right or wrong – just different mindsets.
The message is that bankers and business owners think and behave differently – and no amount of ‘Vince Cabling’, restructures, policy changes or lower interest rates will overcome this one.