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Banks, Lenders & Investors Cash Flow & Forecasting Finance General

Do High Street banks care about their customers?

High Street banks and trustHigh Street banks rely on providing a service to customers yet too often it seems that customers are the last thing banks care about.
Of course, banking is also a business and therefore subject to the pressures and responsibilities of any business to remain compliant and profitable.
However, I would argue that their existence is entirely down to the loyalty of their customers. Yet, customer loyalty is being stretched by the seemingly endless IT problems and closure of branches and ATMs that inconvenience customers, particularly SMEs in rural areas.
Most recently, TSB, encountered yet another IT failure, just a year after the mammoth meltdown which cost it an estimated £366m. To compound the distress for customers, it has just announced that it intends to close another 86 branches, cutting up to 400 jobs over the course of next year.
IT failures have not been confined to TSB, however, and in 2018, the Financial Conduct Authority (FCA), said the number of incidents reported to it had increased by 187% in the past year, 65% of which were from high street banks.
This has prompted a committee of MPs to call for faster action in resolving complaints and awarding compensation, along with more decisive regulatory action, calling the current situation unacceptable.
According to the consumer organisation Which? “Banks and building societies closed a total of 3,312 branches in between January 2015 and August 2019, with an average of 55 closing each month”.
Which? has been tracking the closures and its breakdown shows 1,094 for the RBS Group (NatWest, Royal Bank of Scotland and Ulster Bank) and 569 for the Lloyds Group (Lloyds Bank, Halifax and Bank of Scotland) while it estimates that Barclays has closed approaching 500, although the bank has declined to share figures with Which?
In addition, the organisation has found that 5,000 free-to-use ATMs had been lost between January 2018 and May 2019, the vast majority in rural and more deprived areas.
But it has not only been IT failures and branch closures that have arguably reduced trust in banking.
Only last month, Barclays announced its debit card holders would be able to deposit money but not withdraw cash from a post office counter from January 2020 as a cost saving measure to save £7 million. Following a huge outcry that situation was quickly reversed.
Nevertheless, it was an indication of the general attitudes of the traditional High Street banks given the number of branches and even ATMs that have been disappearing from villages and towns throughout the UK, on the tenuous argument that customers prefer to bank online. And despite the well-known unreliability of internet connections in such locations.
It all adds up to a massive headache for anyone who lives or works outside of a main city location.
So it is with some scepticism and a few hollow laughs that we note the latest Government initiative, a SME Financial Charter, to which, approximately 20 banks and financial service providers have signed up.
The charter is aimed to support SMEs through Brexit and signatories make five pledges:

  1.  We’re open for business and ready to lend;
  2.  We’ll help you prepare for Brexit and beyond;
  3.  We’ll support your application and signpost other options if needed;
  4.  We’ll treat you fairly at all times;
  5.  We’ll work with the government-owned British Business Bank to support SMEs.

The charter is voluntary and clearly limited in scope.
It would have been more to the point if it had been an ongoing pledge, not confined to helping SMEs with Brexit and its aftermath, and if it had been given some regulatory teeth to encourage High Street banks to offer a real service to SMEs and other customers.
 

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

No sign of improvement in shoddy banking services to SME customers

the wild west of shoddy banking servicesIt has been a year of IT meltdowns, continued closures of small branches and ATMs throughout 2018 with the main High Street banks seemingly still unwilling to listen to their SME customers.
At the end of last month the Government’s Treasury Select Committee finally launched an inquiry into the “astonishing” number of IT failures in the financial services sector.
This came shortly after the BSB (Banking Standards Board) had admitted to MPs that there had been little improvement in the UK’s poor banking culture since a parliamentary commission condemned poor standards.
However, whether the select committee will also look at the other frequent complaints about the closure of small branches and ATMS, especially in rural areas, remains to be seen.

Bank IT meltdowns

The most high profile meltdown of the year was suffered by TSB in April, when millions of customers, including SMEs were locked out of its online service and banking app following the failure of its attempt to migrate customers to a new computer system. Service was restored to private customers relatively quickly but I am hearing from a few SMEs that their problems are still not completely resolved.
By September, customers of Barclays, RBS, NatWest and Ulster Bank had also been affected by their banks’ IT issues and in November it was the turn of HSBC’s mobile apps for the fourth time in a month.
The FCA (Financial Conduct Authority) and the Bank of England’s Prudential Regulation Authority also published a discussion paper which suggested that they were considering policies that force banks to improve operational resilience. Among the suggestions were that there should be a maximum outage time of two days and that they should have back-up systems in place.
Banks were given until October 5 to respond. So far there has been a deafening silence on the results.

Small branch and ATM closures – more shoddy banking services

Perhaps more concerning is the numbers of small branches and ATM points being closed.
According to research by Which? a total of 757 branches have been closed or scheduled for closure in 2018 and January 2019.
Which? has been tracking bank branch closures since 2015. At least 2,961 branches have been shut down in the past four years, at a rate of 60-a-month.
The excuse given by the banks is that because more people are now using mobile or online banking it is uneconomic to maintain small branches. According to a report published by UK Finance, the trade body that represents banks, 71% of adults used online banking in 2017, representing 38 million people.
At the same time an estimated 250 free-to-use cash machines are disappearing a month as operators shut unprofitable ones, according to the network co-ordinator Link.
But all these cost saving measures by the banks seem to take no account of the difficulties faced by many SMEs and private customers in small towns and villages across the UK where broadband and mobile phone signals are far from reliable.
The situation has prompted the FSB (Federation of Small Businesses) chairman Mike Cherry to say: “We want to see banks properly justify reasons for closure.  Bank branches are vital to a lot of small business owners.”
And the final irony – a survey carried out by TSB in November found that 68% of small businesses believe their banking needs are being overlooked in favour of larger, more profitable companies.
The survey report said: “Banks must commit to providing face to face local business support in the real economy, not just metro economies, thereby ensuring that not just those that are digitally savvy or based in big cities are able to get the advice and services that can help grow their businesses.”

Automatic closure of accounts

While less reported in the press we are still coming across SME clients whose accounts have been automatically closed, many after years of being a customer of the bank without a record of breaching covenants, exceeding overdrafts or bouncing cheques. The banks try to hide behind claims of concern about money laundering where in practice it would seem that computer driven assessments automate the closures. And in every case we’ve heard of not even a phone call had been received.
So much for banks wanting to have a relationship with their SME customers or being customer orientated. You couldn’t make it up!

Categories
Banks, Lenders & Investors Finance General Turnaround

SMEs demand fair treatment from their High Street Banks

High Street banks sharkEver since the eruption of the 2008 Financial Crisis there has been a seemingly never-ending series of revelations about the way the big banks have treated their SME customers.
Perhaps the most high-profile of these has been RBS (Royal Bank of Scotland) and the devastation it has allegedly wreaked on approximately 16,000 small businesses through GRG, its so-called restructuring division.
Its behaviour was first highlighted in 2013 by the Government’s then business advisor Lawrence Tomlinson, suggesting that GRG applied higher interest rates, extorted high interest rate swaps, pressured customers to sell assets to repay loans, took equity stakes in businesses and pushed them into administration and in some instances bought their former client from their appointed administrator.
Eventually, after considerable lobbying, the situation was investigated by the Financial Conduct Authority (FCA), which published a summary of its findings earlier this year, although it took pressure from the Treasury Select Committee to get it published in full. RBS had a lot of dirty laundry that they wanted to hide from their clients.
However, RBS was only the most high-profile of such scandals, with HBOS, since acquired by Lloyds, also being exposed for its treatment of SMEs. HBOS Reading between 2003 and 2007, referred distressed clients to Quayside Corporate Services, a consultancy that in collusion with the bank plundered the clients’ assets. In this case, six people including bank managers have been jailed for fraud.
Lloyds seems to have done a good job with affected clients, either settling claims or at least managing its PR. RBS, however, has been publicly criticised for its poor progress in compensating the small business owners mistreated by GRG.

The UK’s future economy will depend on SMEs being able to trust their High Street Banks

It should be no surprise, therefore, in the light of such scandals and given the regular reports of the big banks’ inadequate support for their clients in difficulties and their lack of lending to SMEs, that trust among small firms in banks has been undermined and has resulted in SMEs feeling exploited.
Nor should it be surprising that many SMEs are not seeking finance from banks, and if they are seeking finance they are turning to alternative finance providers to fund their growth plans.
Indeed, the FCA’s report into GRG recommended that the turnaround units in all banks should be reviewed, as well as how banks interact with insolvency practitioners who generally act as their advisers when dealing with clients in difficulties. It also recommended enforceable standards of conduct for turnaround units.
There have been calls from the All Parliamentary Group on Fair Business Banking (APPG) for tougher action to protect SMEs from bullying by banks.
The Treasury Select Committee has also launched an inquiry into the whole issue of finance for SMEs, which will consider banks’ duties when dealing with SMEs as well as avenues for dispute resolution and redress.
It has taken 10 years to get to this point.  How many more years will it take before SMEs, the backbone of the UK economy, see effective, concrete action? And how many more for them to trust their bank?
Given the UK economy’s reliance on SMEs, when will banks support them and treat them fairly?