It is New Year's Eve and snow nearly buries a stone house on a remote Arctic island north of Svalbard. Inside, an old man picks up the receiver of a red bakelite telephone and begins to dial. Across the room an elderly woman sits in front of a sputtering coal fire and leafs through holiday brochures.

“This looks nice, two weeks in Barbados. Mmm, what about Mauritius?”

The old man mutters and dials a long number. Thousands of miles away in London, the call is answered: “Bank of Babylon, Corporate Lending, may I help you?”

“My name is Claus. I haff business, I vant to borrow money, a lot of money. I must pay my suppliers.”

“How much do you need to borrow, Mr Claus?”

“I zink $10 billion until April, zen more later. My suppliers say no work on ze old terms. The Chinese vont money now. Zey vont money before zey make toys.”

The banker does not respond. Mrs Claus picks up another brochure with a picture of palm-fringed beaches and turquoise sea. She reads the cover, “Sandals” and sighs, wriggling her toes in worn slippers.

The old man turns to his wife: “Liebling, ve cannot haff holiday. Ve must pay bills. Ze price of everyting, up! Feed for reindeer, up! Cocoa, up! Marzipan, up! Ze elfs haff no pay since November.

The phone crackles: “What did you say your name was?” There is a silence, then a clatter, hushed whispers and a thin, dry voice comes over the line.

“Nigel Grinch here, head of corporate lending. Mr Claus, we need to discuss your loan in more detail. Can you attend a meeting?”

The crumpled face breaks into a grin: “Schatzi, it is OK. Ze bank vill see me. Zey cannot say no to so many children.”

Stuffing a bottle of schnapps in one pocket of his coat and a mince pie in the other, he stuffs a bundle of papers into a sack. Groaning, he heaves himself into the sleigh for what will be the last and most arduous journey of the year. He cracks a whip, the reindeer shake snow off their antlers and leap into the teeth of the blizzard.

Hours later, the red beacon of the Canary Wharf tower can be seen through the mist. The reindeer dive elegantly through cloud to land lightly on the roof of the Bank of Babylon's headquarters.

With a brief glance at the ventilation shaft, the old man heads for the lift. Arriving at the 39th floor, he strides out, bellowing: “Ho, ho, ho!”

A butler in a frock coat sneers: “They are expecting you in the boardroom, Mr Claus.”

The long boardroom table is covered in documents. Rows of young men and women with grey faces and sunken eyes shuffle papers nervously. A tall, lean man with a thin voice greets him: “Ah, Mr Claus, we have already started work on a restructuring plan, debt for equity swaps, perhaps a recapitalisation. But first, please explain how you finance your business.”

The old man sinks with difficulty into a steel-framed chair and empties his sack. An avalanche of crumpled envelopes pours over the table. “Look,” he says.

With long, thin fingers, Mr Grinch picks open a small envelope. Inside is a scrap of paper on which a message is scrawled in crayon. “Mr Claus, this is a letter from a child?”

“Ja, dis is my order. Dis boy vonts PlayStation. I tink dis is last year order. Dis year, all vont Guitar Hero.”

“But how do you finance this?” he asks with mounting impatience.”

“Ze order koms mit promise, promise to be good. Der finanz is gootvill.” Painstakingly, the old man explains to the assembled bankers that his business is funded by millions, even billions of tiny promises from children. The promises (to keep bedrooms tidy, not to be cheeky or to fight with siblings) are then bundled into giant packages and sorted according to relevant gift. The securitised goodwill is accepted, with a small discount, by toy manufacturers as currency for toys.

Mr Grinch looks dumbfounded. Mr Claus opens his bottle of schnapps and offers a glass to a young female banker seated beside him.

The banker erupts: “This is preposterous, ridiculous. Promises? You cannot finance a business with promises. You must have assets, factories, mortgages, inventory.”

“Nein, ve used to make toys but elfs too expensive and vork too slow. Now ve just wrap them. Ve outsource toys to China.” The old man grins, pours more schnapps and places his hand on the knee of the female banker.

“But ve have problem now because not so many children write promise letters and costs go up. Promise values go down. Toy companies vont money now, guarantees. Zey von't vait for Christmas.”

The tall banker turns and whispers urgently to his colleagues who then begin to make urgent calls on mobile phones.

“Mr Claus, I am afraid the Bank of Babylon cannot consider funding your business without a guarantor. Where would this great institution be if we relied on mere promises to pay? Bearing in mind that a collapse of your worldwide toy business could have serious political consequences, I have taken the precaution of notifying Downing Street.”

Crestfallen, the old man shuffles out of the boardroom. It is almost dawn and copies of the day's newspapers are piled in the lobby. “Santa's sunk” shouts one headline. “Bad debts bring down House of Claus” trumpets another.

Arriving home, Mrs Claus greets the old man with a hug and a large mug of mulled wine.

“The phone has been ringing non-stop,” she says. “There are messages to call a Mr Brown in Britain, a Mr Sarkozy in France, a Frau Merkel and an American, Mr Obama. Oh, and a Mr Putin from Russia. They are all offering to help.”

Mr Claus beams. “All is goot. I knew it.”

“But we must issue shares to them in return. They each want 51 per cent of the toy business and Mr Brown said he would need more regulation, a board committee to oversee toy selection and reindeer welfare. They don't like the whip.”

Tears well up in the old man's eyes. Then he spots a new envelope on the hearth. It is a gold card offer from Bank of Babylon. The old man grabs the card and a pile of brochures and the telephone.

“Mausi, let's go on holiday now.”

“Which holiday?”

“All of dem,” says the old man.

carl.mortished@thetimes.co.uk

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