Banking scandals have had catastrophic impact on victims, says MP

George Kerevan, who chairs the all-party Parliamentary group on Fair Business Banking, said he was deeply concerned by the lack of a “cheap, timely and fair” resolution process for small businesses who are in dispute with the big banks.

The all-party Parliamentary groups on Fair Business Banking and Alternative Dispute Resolution have joined forces to launch an inquiry into the “suitable mechanisms” that can provide a long-term resolution process for firms who find themselves in a financial dispute. Last month, Andrew Bailey, the chief executive of the Financial Conduct Authority, told The Yorkshire Post that Britain lacks an “adequate” complaint resolution mechanism for small firms who believe they have been mistreated by the big banks.

Britain’s big banks have been rocked by scandals ranging from the manipulation of foreign exchanges to the mis-selling of complex interest-rate hedging products to SMEs (small-and-medium-sized enterprises).

Mr Kerevan, who is the SNP MP for East Lothian, said: “The economic cost of these scandals in terms of the negative impact on SME growth - never mind the human cast in suicide, depression and failed marriages - has been truly catastrophic.

“We are failing our small business community by not giving them the legal platform to challenge a big lender when they are treated unfairly.

“We have had eight years where, despite growth, levels of productivity remained suspiciously poor,’’ he added.

“A lot ​of this is down to underperformance in the small business sector caused by an unwillingness to borrow and invest.

“And no wonder, given the bullying tactics used by big banks when defending themselves from legitimate accusations by SME customers of mis-selling and forced insolvency.

“Unless we create a better permanent resolution system, we will not be able to create the economic growth that we all hope to see.”

Mr Kerevan said the inquiry would produce solid proposals to create a more effective dispute resolution system. He said he was delighted by the positive engagement with the chief regulator, Andrew Bailey.

He added: “Stakeholder engagement has been overwhelmingly positive and supportive. Industry, trade bodies and businesses all recognise that, unless we start to address the systemic issues, we will not be able to rebuild the confidence required to move on from the financial crisis.”

The inquiry will present recommendations that can be adopted on a voluntary and statutory level to address the gap in the dispute resolution system, Mr Kerevan said. A British Bankers’ Association spokesman declined to comment on Mr Kerevan’s statement.

A Treasury spokesman said: “It is important that banks treat customers fairly. That is why we set up the independent Financial Conduct Authority and gave it strong, new powers to protect consumers. It is currently looking at the small business banking market and we await its findings.”

The FCA launched a discussion paper last year to consider issues facing SMEs as users of financial services, and the responses are being analysed. The Government has said that, when the FCA’s findings are published, it will consider them closely, and “if that includes reviewing the support in place for businesses resolving financial disputes, that is something we will look at”.

The Government said it is committed to regulating “only where there is a clear case for doing so”, in order to avoid putting additional costs on firms that would ultimately be borne by the customers of these firms.

Last month, Mr Bailey said: “One of the things I am very involved with at the moment with Parliament is the question of having an adequate complaint resolution mechanism for firms. There isn’t one at the moment.”

Mr Bailey made the comments during a trip to Yorkshire to meet campaigners who are worried about the rising levels of consumer debt.