If there is anything good to come from the ongoing tumult surrounding Royal Bank of Scotland’s Global Restructuring Group, and the way it dealt with struggling firms, it is the belated recognition on the part of the authorities that there needs to be a body like the Financial Services Ombudsman to resolve disputes between banks and small and medium sized enterprises (SMEs).
There is a profound power imbalance at work between the bank on the one hand and the SME client on the other. By SME, we could, by the way, be talking about really quite large companies, that might turnover millions of pounds, but lack the resources to hire the sort of big city lawyers it usually takes to get bankers around a table.
While RBS and GRG have been getting all the attention, and small wonder given the way they have behaved, they are far from alone in causing problems.
The All Party Parliamentary Group on Fair Business Banking, in seeking a House of Commons debate on GRG, and the current failure to protect small businesses more generally, has penned a motion noting that “there are wider allegations of malpractice in financial services and related industries”.
It believes that this “indicates a systemic failure to effectively protect businesses, which has resulted in financial scandals costing tens of billions of pounds”. The the only trouble with its forwarding a motion like that for debate: Is anyone who could possibly be found to argue against it? Or at least the first part of it.
The group’s call for a tribunal system to deal with disputes (in the second part of the motion) is similarly hard to fault. The trouble is it is hard to see “the collective and collaborative effort of regulators, parliament and government” it wants, and that the creation of such a system would require, happening in the current climate when the Government has but one policy of note (Brexit) that it is currently making a right royal mess of.
As for the independent inquiry it calls for, that might simply end up kicking the thing into the long grass, which might suit ministers, but won’t do much for a business community that is being failed right now.
Having been stung into action, the Financial Conduct Authority, whose boss Andrew Bailey appeared before the Treasury Committee for a ritual kicking this morning, is set to unveil proposals in the next couple of weeks that will lead to the remit of the Financial Ombudsman Service being extended beyond the individuals and micro enterprises that are currently covered.
Business picture of the day
It’s a start, one that should provide a port of call for at least some businesses that currently have none. With the PPI review winding down, there’ll also be some welcome work for all the extra case officers the Ombudsman has had to take on.
But ultimately, however far the FCA pushes the envelope with its proposals, they will only serve as a sticking plaster. Without new legislation the FCA can only go so far. Only a limited number of businesses will be covered and the Ombudsman’s payouts are capped at £150,000.
Sadly, it looks like a more comprehensive system will just have to wait until the Government’s destructive Brexiteers have had their fun.