What is bank mediation?

It is a phrase more commonly associated with family law, but enquiries for mediation in the banking and financial services sectors are increasing in Northern Ireland. Conor Devine, principal, GDP Partnership, explains why the popularity of this process is on the rise. 

When the city of Detroit filed for Chapter 9 in 2013 it became the largest municipality in U.S. history to enter bankruptcy. Motor City’s engines had stalled and Detroit, the historic heart of the American automotive industry was in difficulties.

Many expected the bankruptcy case to fall into prolonged and acrimonious courtroom battles, but two forward-thinking federal judges chose to use mediation as a method of overseeing tense negotiations with the diverse creditor groups across the city. The city is now proceeding with its plan to introduce a proposal to restructure its debt and reshape government operations, and while they are not out of the woods, there is hope for Motor City.

So what is mediation?

While bankruptcy might have been the inevitable outcome for Detroit, it is something that too many people here in Northern Ireland are jumping into too hastily. It isn’t the only option available to hard-pressed businesses and mediation can be a useful process in which to explore all options available to them.

Mediation is something that most of us associate with family law cases, but is in fact a process that is being used more regularly to settle disputes in the banking and financial services sectors. It is a strategic, focused, fully informed and balanced process of negotiation, which can involve an individual or business that would benefit from a pragmatic early settlement allowing them or their organisation to move forward. By focusing on crafting a solution which respects the viewpoints of all parties, rather than laying down a judgment of right and wrong, GDP can mediate on your behalf and reach an agreement that works for both the institutions and the borrowers.

Finance through the downturn

Working with SMEs from all sectors of the Northern Ireland economy has also highlighted another barrier to growth for many businesses – access to finance. The latest Bank of England figures show that all lending to businesses fell by £4.3bn between September and November 2013. Business lending in 2012 fell by £1.5bn a month on average, in 2013 it fell by £1.1bn a month. Add to this the well-documented failings of some banks to act in the interests of their customers and it isn’t hard to see why a spokesman for the Bank of England also announced that many businesses now prefer to raise money by themselves, rather than taking a loan from a bank.

At GDP we can confirm this as we receive numerous requests every week to assist SME’s to raise finance and in the majority of cases our only option is to look for finance outside banking systems be it through investment funds or private individuals who are looking a greater return than the small returns being offered by banks. To date GDP has sourced finance for businesses that are performing, profitable and growing. These businesses and their needs were not even entertained by the banks. The banks have been proven wrong as these businesses are now growing, creating jobs and contributing to the economy. This alternative source of funding from non-traditional sources is filling the gap in the economy and allowing some businesses to succeed and thrive.

What next?

SMEs are the engine room of all economies and perform much better than large companies when it comes to net job creation and technical and business innovation. And while alternative lenders are to be welcomed to the market, they don’t have the lending firepower of banks to stimulate an economy.  We need our banks working again and lending to SMEs and the wider economy if we are to have any sustained form of economic recovery.

Ultimately it is about making sure the Northern Ireland economy moves forward – whether that is through increased lending from banks and alternative sources or indeed through a process of mediation ensuring viable businesses can continue to operate. Just like Motor City, it is vital that we keep the wheels on the road and engage meaningfully to begin our return to sustained growth.

To find out more visit: http://www.gdpni.com/index.html

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