Members of the All Party Parliamentary Group on Fair Business Banking (APPG) have been calling for the establishment of a new tribunal to defend SMEs (small and medium-sized enterprises) after they voiced concerns that the current financial regulatory system is not strong enough.
Kevin Hollinrake MP, the co-chairman of the APPG, believes action is needed to ensure bosses of small firms with a legitimate grievance against the banks have access to justice.
The APPG believes there is a gap in protection for small firms who believe they have been mistreated by the banks.
Mr Hollinrake contacted the FCA to make the case for establishing an independent financial services tribunal that would be paid for by the banks.
The APPG had been concerned that one possible solution - a proposed expansion of the Financial Ombudsman Service (FOS) - would not be suitable for complex financial disputes.
A spokesman for the APPG said: “Of great interest is the fact that the FCA have endorsed our position on the need to have a Financial Services Tribunal to deal with the more complex and larger claims that cannot be heard by the FOS (Financial Ombudsman Service).”
In a letter to the APPG, Andrew Bailey, the chief executive of the FCA, said: “In principle, we see a role for both the Financial Ombudsman Service and a tribunal for resolving financial services disputes as they meet different needs.
“For example, the ombudsman provides a quick and informal process for relatively low value financial services disputes.
“A tribunal, on the other hand, could provide a more formal, court-like approach for higher value disputes, or disputes involving complaints above the Ombudsman’s eligibility thresholds.”
Mr Bailey added: “The ombudsman does not have the power to compel the attendance of witnesses, take evidence on oath or test evidence by cross-examination”
“Subject to knowing the specifics of the design, governance and operation of such a body, particularly its relationship to the FCA’s regulatory regime and other dispute resolution mechanisms, such as the Ombudsman, we support the establishment of a financial services tribunal.
“However, as we have said on several occasions, such changes would require primary legislation.”
Responding to Mr Bailey’s letter, Mr Hollinrake, who is the MP for Thirsk, Malton & Filey, said: “We are pleased to have the support of the FCA for our proposals for a tribunal.
“Andrew Bailey recognises that an extended ombudsman will not bridge the gap as a standalone solution and explicitly recognises the limitations to such a system.
“It is clear to both the APPG and the regulator that the only way forward is for an extended ombudsman and a tribunal to work in tandem to provide a much more comprehensive dispute resolution landscape.
Mr Hollinrake added: “We will be failing the SME business community if we settle for anything less.”
In his letter to Mr Hollinrake, Mr Bailey stresses that the FCA is able to hold firms to account over the way that they handle allegations of past misconduct, for example through redress schemes.
Mr Hollinrake also asked the FCA to support the APPG’s call for a “full statutory inquiry into the business banking sector”.
In response, Mr Bailey said: “I can understand the desire of small businesses who feel they’ve been let down by the banks, and the current legal and regulatory system, to have something akin to a ‘day in court’
“Ultimately, however, whether or not to commit to a public inquiry would be a decision for the Government and Parliament.”
Supporters of a public inquiry believe it would help to restore confidence in the banking sector, which has been shaken by mis-selling scandals. Mr Hollinrake has warned that misconduct involving the big banks has harmed tens of thousands of small businesses.
The FCA is the conduct regulator for 58,000 financial services firms and financial markets in the UK and the prudential regulator for more than 18,000 of those firms.
It is an independent public body funded entirely by the firms it regulates, by charging them fees. UK financial services firms employ more than 2.2 million people and contribute £65.6bn in tax to the UK economy. The FCA is accountable to the Treasury and Parliament.