It is now approaching ten years since SMEs’ scandalous treatment at the hands of RBS (Royal Bank of Scotland) and its insolvency arm GRG (Global Restructuring Group), and of HBOS Reading emerged prompting investigations into the way the major banks treat their SME customers.
In July, the FCA (Financial Conduct Authority) announced on completion of its RBS investigation that its “powers to discipline for misconduct do not apply and that an action in relation to senior management for lack of fitness and propriety would not have reasonable prospects of success”.
Andrew Bailey, FCA Chief Executive admitted that its inability to take action should not be seen as condoning RBS’ behaviour.
Earlier in the year UK Finance, the trade body for banking and finance, had appointed Simon Walker CBE – the former Director General of the Institute of Directors – to review the disputes and resolution process.
The result of this SME Complaints and Resolution Review was published late last month and concluded that setting up a new tribunal would be too costly for both Government, SMEs and banks and instead has supported the FCA’s planned extension of powers for the Financial Ombudsman Service to cover business banking customer complaints.
Not surprisingly this has been welcomed by some Banks and UK Finance has called the review a “valuable contribution” to the debate.
Nevertheless, the APPG (all-party parliamentary group) on fair business banking, led by Kevin Hollinrake, has repeated its call for the creation of a financial services tribunal and for a compensation scheme for business customers who were victims of the RBS and HBOS behaviour.
The APPG argues that Walker’s report clearly identifies that there is a limit to the proposals, which do not extend beyond a compensation limit of £600,000, cannot compel witnesses, cannot force disclosure of information nor deal with insolvency issues.
It has also been argued that The Financial Ombudsman Service, even with extended powers, is insufficient since the maximum compensation it can award is £350,000, regardless of the £millions in losses that some SMEs have sustained.
Equally, many SMEs have argued that pursuing complaints using the civil courts as an alternative is hugely costly since large defendants generally adopt a strategy of attrition with the aim of causing their SME claimants to run out of money before the case is heard.
It looks as though there is likely to still be a considerable wait before SMEs get a fair and equitable system for resolving disputes with the disproportionately more powerful banks.