Time is pressing and you’ve been told you can ask just two questions. Just two questions; not the dozen you might have planned. This, dear reader, was the dilemma I faced as I prepared to interview Philip Hammond, the Chancellor of the Exchequer, during his whistle-stop tour of Yorkshire. I decided to be a rebel and try to slip in at least three questions.
The venue was the Lloyds Banking Group’s head office in Halifax. Mr Hammond was on a mission to show that the Government cares about the corporate world outside the City.
When I finally entered the interview room, Mr Hammond told me that the regional financial services sector would be “top and foremost” in his mind when the Brexit negotiations begin.
This must be music to the ears of anybody working in the sector outside the Square Mile. As Mr Hammond observed, more than 60 per cent of all employees in the financial services sector are based outside London. It was inspiring to hear about Mr Hammond’s enthusiasm for Yorkshire’s banking sector. But not everything in the financial services garden is lovely. So this was my next question: “When I talk to our readers, many small business owners have lost confidence in the banks because of scandals like the mis-selling of interest rate hedging products.
“Do you believe the banks have learned their lesson and do you also believe that the regulatory system is strong enough?”
In response, Mr Hammond said a lot had changed in the regulatory system and the banking market. He stressed that many banks were working hard to build up their small business customer bases. He said there had been “a lot of perverse incentives in the remuneration structures pre the crisis, where people were driven to promote risky products and to indulge in risky behaviours because they were rewarded for doing so”.
But Mr Hammond believes things have changed for the better. He said that pay structures have been re-organised in a way that steers people away from risky behaviours. The number one purpose of financial services is to serve the real economy, he said.
Fair enough. But what about the recent performance of the Financial Conduct Authority ? Kevin Hollinrake, the Conservative MP for Thirsk and Malton, has called for the creation of a watchdog “who is prepared to bite” in order to protect small business customers who have been mistreated by the banks.
So this was my final question: “Many MPs have criticised the Financial Conduct Authority. Is the FCA facing some kind of crisis of confidence at the moment?”
Mr Hammond said he did not believe this to be the case, although he acknowledged that MPs will always have issues they wish to bring to the fore.
He said the FCA and Bank of England were regulating the system in a way which provides confidence with regards to financial stability and the fair treatment of individual customers.
He added: “Nothing is ever going to be perfect; there will always be cases that need to be dealt with and I hope that the FCA is agile enough to respond to the changing picture and to deal with issues when they arise.”
Many of our readers will not share the Chancellor’s faith in the FCA. In particular, small firms believe a new approach is needed to ensure they are protected from bullying and incompetent bankers. Mr Hollinrake is calling for the creation of an independent tribunal to oversee complaints about the banks from SMEs.
Mr Hollinrake said: “I have met many business people who have been treated appallingly by their banks and we are determined to open up an affordable route to justice.”
We need to tear up the current regulatory structure and build a system that places the victims first. The Government must create a new, agile regulator that shores up confidence in our financial services sector. Only then will the economy be able to steam ahead with confidence into uncharted waters after Brexit.