HBOS Reading: Independent Review

Part of the debate – in Westminster Hall at 5:15 pm on 18th December 2018.

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Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury 5:15 pm, 18th December 2018

I will happily meet my right hon. Friend—a distinguished former Minister who has been fighting on these matters for many years—and my hon. Friend the Member for Thirsk and Malton. Of course I acknowledge the cynicism and concern of those present about the independence of this mechanism, but, as I said, Lloyds has committed to publishing the independent review once it is concluded and implementing any recommendations that it produces. My officials have been working with the FCA to ensure that that comes to pass. I take the concerns about how it progresses very seriously, and will happily meet Members to discuss them.

In the recent Budget, the Chancellor stated the Government’s support for the FCA’s plans to expand eligibility to complain to the Financial Ombudsman Service to small businesses as well as micro-enterprises. Expanding the remit of the FOS will ensure that from 1 April 2019 well over 99% of all UK businesses will have access to fast, free and fair dispute resolution. I am aware that concerns have been raised about the capability of the FOS to adjudicate effectively in such cases, and I discussed those concerns with the Chair of the Treasury Committee just last week.

The FOS has announced its plans to create a ring-fenced, specialist unit to take on the additional cases, and for that unit to be supported by a panel of external SME experts. I welcome those plans, and I will visit the FOS early in the new year to check on how they are progressing. The FCA has also committed to reviewing the expansion of the FOS remit within two years of its coming into force, in addition to its usual oversight processes. I trust that that will reassure some hon. Members who have voiced concerns about the capability of the FOS.

I have also been clear that banks need to work hard to restore businesses’ trust in their institutions. That is why I welcome the banking industry’s recent commitment to establishing two independent voluntary ombudsman schemes, in response to Simon Walker’s review of dispute resolution for SMEs. One of those schemes will address complaints from SMEs with a turnover of £6.5 million to £10 million. The other will address unresolved historical complaints from SMEs that have not already been through a formal process.

I am pleased that the banking industry has set out the key principles for the operation of the scheme to address unresolved historical complaints. Independence, expertise, transparency and the right to an appeal are all hallmarks of a fair and robust process, and it is right that they underpin any approach to dispute resolution. I welcome the banking industry’s commitment to having those schemes up and running by September 2019. I look forward to seeing progress on establishing the implementation steering group very soon, and I am pleased that representatives from the all-party parliamentary group will have a role in that process.

The benefits of an ombudsman-style approach are clear, but I recognise that some hon. Members have advocated again today for the establishment of a tribunal to resolve disputes between banks and SMEs. An ombudsman-style approach can deliver fast, free and fair dispute resolution for SMEs, making decisions based on what is fair and reasonable. I believe that a tribunal, on the other hand, would need the regulation of SME lending, potentially restricting SMEs’ access to credit. It would still require SMEs to pay for expensive legal expertise, and it could make decisions only on a strict legal basis. That is why I believe that an expanded FOS remit, alongside the establishment of further independent ombudsman schemes as announced by UK Finance, will ensure the best outcomes for SMEs.

I highlight again that the Government, financial regulators and industry have done considerable work to tackle bad practice and to ensure that SMEs have access to appropriate dispute resolution and redress mechanisms. The all-party group on fair business banking and finance has been a key part of that work, and I sincerely commend its determination in the work that it has undertaken to ensure that SMEs are fairly treated.

The events at HBOS Reading constituted criminal activity. As such, it was right that those responsible were brought to justice. However, more clearly needs to be done to restore SMEs’ trust in the financial services industry. From the numerous meetings that I have had on this year with a wide range of stakeholders, it is clear that we are all determined to deliver the best outcomes for SMEs.

I will closely follow the review of the Griggs scheme. I understand the concerns, but it is a significant step forward that that review will take place, and I will monitor the implementation of both the expanded FOS remit and the industry’s independent voluntary ombudsman schemes. I am confident that we have the right regulatory regime and dispute resolution mechanisms in place for the future. Events similar to those at HBOS Reading should not occur again, and I will do everything in my power in office to ensure that we learn the lessons from those appalling incidents years ago.