Categories
Banks, Lenders & Investors Cash Flow & Forecasting Finance Insolvency

How much longer before SMEs get a fair system for dispute resolution with the Banks?

fair dispute resolution with the banks?It looks likely that SMEs still have some time to wait before a cost effective and fair system for dispute resolution with the Banks becomes a reality.
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.

Categories
Banks, Lenders & Investors Finance General Rescue, Restructuring & Recovery Turnaround

Banks, bad behaviour and relationships

How would you define a relationship?
For most of us, it would most likely include some form of personal interaction and some clear mutual benefits for those involved.
On this basis, it seems that the banks still don’t get it. While they might talk about wanting a relationship with their customers, we’re hearing that it is still a one-way deal.
At the top level, bank CEOs and senior executives appear to have accepted the need for change, but the message does not appear to have filtered down to middle management. There may be more local managers tasked with taking care of SME customers, but when each has a case load in the hundreds and in some cases thousands, how can they hope to build any meaningful understanding of their customers’ needs?
While the marketing language may have changed it seems the behaviour hasn’t. SME customers are still being treated as ‘cannon fodder’ to whom ‘products’ are sold by a computer.
It seems banks still need to embrace the need for change – or are we speaking to the wrong customers?

Categories
Banks, Lenders & Investors Business Development & Marketing General Rescue, Restructuring & Recovery Turnaround

RBS – whitewash or exoneration?

 

The first of the investigations into behaviour by the Royal Bank of Scotland (RBS) following publication of the Tomlinson Report in November last year has found “no evidence” to back up the most serious allegations that the bank systematically put customers out of business.

Clifford Chance does not however completely exonerate RBS in its dealings with customers, only the allegation of a deliberate policy – a copy of the report is available at  http://bit.ly/1ljINfK.

The report by the law firm Clifford Chance was commissioned by RBS after Tomlinson, adviser to the Department for Business, Innovation and Skills, investigated the behaviour of the RBS-owned turnaround unit, Global Restructuring Group (GRG).

His report accused GRG of systematically charging large fees to small businesses, thereby putting them out of business and generating profits for the bank.

While there is speculation that RBS could sue Mr Tomlinson for libel, for damage to the bank’s reputation, it is likely that RBS will wait for the FCA report before responding formally

Given that Clifford Chance are a panel firm of advisers to RBS and the limited scope of their investigation, it will be interesting to see if their findings are supported by the FCA whose report is due to be released much later this year.