The Government has an unhappy talent for extracting defeat before it gets within a 10 mile radius of victory. The failure of the Government to support plans for a new tough, financial services tribunal to support small firms who have been mistreated by the banks represents an appalling lapse of judgment.
For more than a decade, small firms who have been mistreated by the banks have been campaigning for regulatory change. The best way to ensure rogue bankers don’t bully small firms is to establish a new tribunal which will ensure that justice is seen to be done.
The knowledge that misconduct will lead to public humiliation and a hefty fine would concentrate minds wonderfully. The banks would be forced to behave and confidence in them, which was shattered by the events of 2008, would finally be restored . The Yorkshire MP Kevin Hollinrake has been one of the most eloquent and forceful advocates of the tribunal idea because he has witnessed the carnage left behind by bankers with no moral fibre.
He has not been a voice in the wilderness. The All Party Parliamentary Group on Fair Business Banking, which Mr Hollinrake co-chairs, has led the charge for the tribunal plan. It has also gained support from the Financial Conduct Authority, which has acknowledged the value of a formal court-like approach for higher value disputes, and the Treasury Select Committee (TSC), which expressed horror at the “scandalous” way the banks have been allowed to mistreat their victims. It’s hard to remember any argument for regulatory reform that has attracted such a chorus of approval.
There might, of-course, be a complementary role for the Financial Ombudsman Service (FOS) in dealing with some complaints, but it does not seem wise to add to the FOS’s already heavy workload.
The Government’s response to the TSC report has left supporters of the tribunal proposal feeling bitterly disappointed. The idea seems to have been killed off, at least for as long as this Government clings to power.
The Government believes an ombudsman-style approach is preferable to a tribunal because it claims it will offer a cheaper, faster route to justice for small firms.
The Government also said: “The Government is supportive of both the FCA’s planned expansion of the FOS to include ‘small businesses’ as well as micro-enterprises, and the banking industry’s commitment to establishing a voluntary ombudsman scheme to address future complaints from SMEs with a turnover of £6.5m-£10m.”
The Government believes that any company with a turnover greater than £10m can “reasonably” be expected to take a bank to court. There were gasps of astonishment when I mentioned this assertion to an adviser who is trying to gain justice for hundreds of small firms who claim to have been bullied by the banks.
The APPG said it had been frequently contacted by firms with a turnover above £20m who lacked the resources to wage a successful legal battle against banks with a fearsome legal arsenal at their disposal.
And should the banking industry really be the driving force behind a “voluntary” ombudsman scheme to tackle historic complaints from small firms? The Government has said that this scheme will be established “independently of the banking industry” and overseen by a former senior judge.
But to be truly independent, wouldn’t it be much better if it was established by our own Government? The TSC called for action to create a new regulatory regime because “waiting for another high-profile misconduct scandal before pursuing it would be irresponsible”.
The Government’s response reveals a complete lack of understanding about the powerful forces ranged against small business owners who have been brought to their knees by banking misconduct.
The proposals will not shore up confidence in the banks and it also denies victims the chance to gain justice in an open tribunal.
Over this policy, like Brexit, Mrs May’s regime is hopelessly adrift.