Tuesday will see one of those moments which may prove a turning point in the development of an effective UK banking system.
That is the day that the banks will reveal the geographical spread of their lending, down to 9,000 different postcode levels.
It is the culmination of a major effort by Lib Dems in the House of Lords earlier in the last two years, with a great deal of help from elsewhere, to make sure that this happened.
It is also a creative moment of possibility – not to criticise the banks, because they need to be given the credit for this openness, but to see how it might shape policy in the future.
The Americans have used geographical lending data since 1977, in their Community Reinvestment Act, to determine how much the big banks must pay to build a local lending infrastructure – of community banks and community development finance institutions (CDFIs) – to lend where they find it difficult.
In the UK, in contrast, we have had a succession of measures – Project Merlin, Funding for Lending – which have not persuaded the banks to lend more in the critical SME sector.
This is largely the fault of the politicians: they find it hard to accept that the big banks are no longer geared up for SME lending – except, as the figures will show on Tuesday, in the south east. They have no systems, no local intelligence, to price that kind of risk.
The implication is that, where they are unable to lend, they must fund the infrastructure to make lending possible. That is the way forward, and a potential Lib Dem solution to re-balancing the economy.
But it is already clear that the banks will struggle. Their fightback is already clear: they will say that Community Reinvestment Act (CRA) lending caused the sub-prime meltdown.
They must know this isn’t true. The Federal Reserve investigated it and found that, actually, CRA-backed loans were half as likely to default than those loans made by institutions which had opted out of the CRA.
In fact, CRA lending was an insulation against financial meltdown. And if you don’t believe me, read the findings:
E. Laderman and C. Reid C, 2008 ‘Lending in Low- and Moderate-Income Neighborhoods in California: The Performance of CRA Lending During the Subprime Meltdown’ Working Paper 2008-05, Federal Reserve Bank of San Francisco
So why are the banks peddling this nonsense, when they know it isn’t true – and when they operate inside the CRA framework themselves in their US subsidiaries? I couldn’t possibly comment.
But let me make this prediction. Within three years, the UK banks will be happily operating a related system, financing a new local lending infrastructure – which can genuinely rebuild local economies.
Ad they will do so willingly, because it allows them to end the argument once and for all about whether they lend enough to SMEs.
* David Boyle is the author of many books and is co-director of New Weather Institute. Prosperity Parade is available on Amazon and as a downloadable pdf at http://www.newweather.org/2016/03/13/why-policy-makers-dont-see-the-next-local-economic-revolution/