News that the FCA is giving the green light to the Financial Ombudsman Service to have greater access to SMEs is to be welcomed.
The expanded Financial Ombudsman Service (FOS) remit is a long time coming. Its new powers will extend to businesses with an annual turnover below £6.5m ($8.48m) with fewer than 50 employees, or an annual balance sheet below £5m.
The Financial Ombudsman Service will now be able to award a maximum compensation of £350,000. According to the FCA, an additional 210,000 SMEs will be eligible to take their complaints to the Ombudsman Service. It is, however, only a partial solution. Questions remain about the FOS skill set to determine complex cases.
The calls from politicians from all parties for a complementary Financial Services Tribunal will not go away. Such a tribunal would need the power to compel witnesses, force the disclosure of information and hear judgements in a public forum that can influence culture and behaviour. Only a tribunal is likely to have the authority to ensure that large financial institutions fear it and comply with its judgements.
Such action might have been avoided but for the indefensible way in which certain lenders, in particular RBS in relation to its Global Restructuring Group, have acted. The saga of commercial lending regulation has been even more shameful, and does the government and the FCA little credit.
The FCA has said time and again that it does not have the powers to deal with commercial lending. So it blames parliament – which, meantime, when it is not otherwise fixated by Brexit, lazily responds via a succession of unimpressive Treasury ministers that it is for the FCA to speak out if it feels it needs more powers.
Matters ought to have reached a head with the FCA announcement that it would take no action with regard to the treatment of RBS GRG customers. Even where the FCA recognised that customers had been mistreated, it said, this is unregulated activity, so we cannot act.
It remains a moot point as to whether the Senior Managers Certification Regime, rolled out in 2016, gives the FCA sufficient powers to deal with issues of misconduct in business lending.
The UK regulators are held up on the global stage as being among the best – in other areas at least. Having the luxury of attending, speaking or chairing banking conferences around the world, I hear international bankers praise the UK for its approach to encouraging competition.
If anything, we now have a surplus of new bank startups – well done the UK regulatory system. Take Open Banking: the UK is leading the way with support for fintechs and a benevolent tax regime – again the UK punches above its weight.
Bearing in mind the damage inflicted upon the victims of scandals such as HBOS Reading and RBS GRG, more needs to be done to ensure that small businesses are not exploited. That may, however, be a trifle unfair on lenders that enjoy unsullied reputations in this sector, such as Handelsbanken or Metro Bank.
A positive note – confirmation of payee to be welcomed
Paul Horlock, chief executive of Pay. UK, is one of the good guys in UK banking. He did an outstanding job at Nationwide and was a prudent choice as CEO of Pay.UK. Push-payment fraud has risen up the political agenda in the past year, with the Treasury Select Committee (TSC), among others, demanding action.
Banks have been accused of dragging their heels; meantime, a total of £145m was stolen from UK bank customers in the six months to end-June via push-payment fraud. The plan to roll out confirmation of payee from next year is a welcome step. Banks and building societies must have systems in place by April, with the system to go live
Once live, when consumers set up a new payment, or amend an existing one, banks will be able to check the name on the account of the person or organisation being paid. Consumers entering the wrong name for the account holder will be told the details do not match and advised to contact the person or organisation they are trying to pay. Woe betide any bank that fails to meet the deadline: not only will they have to answer to the Payment Systems Regulator, they can probably expect an invitation to appear before the TSC. As the ex-CEO of TSB can testify, that is not an invitation always to be welcomed.