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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: mishedlo who wrote (107836)2/4/2010 1:43:14 AM
From: Haim R. Branisteanu  Read Replies (1) of 116555
 
Hi Mish there must be clear evidence of bank fraud for a bank to close down the credit line. In any loan agreement there are covenants regarding equity in the business profitability free cash flow and assets to loan ratios as long as those items are within the limits the bank can do nothing. See USC Title 18 Part 1 Chapter 31,41,47,63 on issues related to banking and insurance.

As to the quality of the accounts receivables and their aging their viability this is a tricky issue, as are the accounts payables etc.,

IN general what a bank does it is much more stricter in evaluating their collateral and just makes life more difficult so that the client moves to a finance company with more lax lending criteria or is factoring the accounts receivables.

Interference of the bank with the business costumers as described in your post is a NO NO - and the borrower can sue the bank for damages op to 5 years in anticipated gross profits, same on other issues.

What a bank can do is recommend all kind of solution and continually pressing the business to come to "consultation" etc., until he leaves.

Not willing to issue new lines of credit or if a line of credit is terminated by previous contract and not willing to renew it on same terms or at all is perfectly legal and I think there lies the problem – credit line terms expired and the bank refuses to renew the credit line and goes after the assets including AR’s – it is a hideous practice and most small businesses do not know it. IMHO those bankers should be fired on the spot and not permitted to work for the banking industry again. Unfortunate the Banking lobby is too strong and in general more senior bankers are the scourge of human beings. They are trained to be so, but one to be successful must have this ingrained in their basic character.

From my long experience (20+years) with commercial banks the senior management at banks are criminally inclined but just do not cross the line, WS types are even worse and any one there who is honest and fair does not have a chance to advance in his career. An honest considered well meaning banker will never get to a higher position!

As a side comment ALL bankers have substantial training courses in their career and what they are taught in those courses besides legitimate banking issue is how to cheat and swindle people of their money LEGALY and with in the laws. (there are too many examples how this is done)

Those that do not generate enough so called "fees" for the bank – e.g. cheat and steal never go to additional courses the higher they are trained the more sophisticated the schemes become
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