YOU’ve worked beyond the point of exhaustion to keep your business afloat.
And then, through no fault of your own, your dreams are wrecked by misconduct involving a bank. Who will take up the cudgels on your behalf? At a regulatory level, the answer appears to be: “Nobody.”
Our regulators simply don’t have the clout to punish banks who bully small firms. This colossal regulatory failure is placing the entire economic system in jeopardy. Last year, Andrew Bailey, the chief executive of the Financial Conduct Authority, (FCA) told me that Britain lacks an “adequate” complaint resolution mechanism for small firms who believe they have been mistreated by the banks. Mr Bailey showed commendable honesty in pointing out this giant flaw in the system.
He said he was working with Parliament to try to find a way of putting this right. A year and a half later, we do not appear to be nearing a solution. It’s unsurprising that an exasperated group of MPs is calling for a public inquiry to finally lance this regulatory boil.
For small business owners, their enterprise is so much more than just a means of making a living. It is a life’s work. Their self-worth is linked to the performance of a business which often carries the family name. The loss of the business can have devastating psychological consequences. Marriages have collapsed. Families have been destroyed. Campaigners told me that some victims of banking misconduct have been pushed to the brink of suicide.
Kevin Hollinrake MP, the co-chairman of the All Party Parliamentary Group on Fair Business Banking, (APPG) has warned that misconduct involving the big banks has harmed tens of thousands of small businesses. The APPG has written to Mr Bailey demanding that he launches a public inquiry into the regulatory regime for business banking.
The letter to Mr Bailey, written by Mr Hollinrake, does not pull its punches: “The lack of accountability of senior figures in the financial services industry for the widespread destruction of British businesses undermines confidence in our financial services sector and is a threat to the integrity of the sector as a whole.”
The APPG has already written to the FCA to express concerns about dispute resolution, compensation and the standards of turnaround units in financial institutions.
The APPG remains frustrated that the level of compensation for misconduct is wholly within the “gift” of the institutions themselves.
Too frequently, the banks can act as both judge and jury.
To quote Mr Hollinrake’s letter: “The banks operate a policy of ‘unnatural selection’, allowing cases that they can win to go to court, whilst imposing gagging orders to prevent those who have been unlucky enough to at least get something back from speaking out.
“This position is wholly unacceptable and untenable.”
According to the APPG, there have been no substantive regulatory changes to stop misconduct from happening again. So the group wants to see a public inquiry that will investigate the complex “and often incestuous” relationships between financial institutions, their advisers and the regulatory framework that is supposed to uphold standards. Incestuous relationships are never healthy in financial services because they lead to conflicts of interest. They confuse customers who believe the bank will always act in their best interests.
Too many investigations into banking scandals have been held behind closed doors. We must hold a full public inquiry into what Mr Hollinrake describes as the often “savage” treatment of businesses.
“In reality, many of these businesses were - or could have been with the appropriate support - viable,’’ Mr Hollinrake said.
“This occurred not only during the peak of the financial crisis, but continues today,” he added.
It is time to shine a spotlight into the secret, inner world of financial institutions and their complex relationships with advisers.
By allowing in the sunlight, financial services firms will have an opportunity to seek redemption.