AN independent report has warned the government against setting up a tribunal system to help small businesses resolve disputes with banks.
Led by Simon Walker, a former head of the Institute of Directors, the SME Complaints and Resolution Review warned that such a move would be “expensive for government and for participants”.
However, the All-Party Parliamentary Group (APPG) on Fair Business Banking said that while it was pleased the report recognised the “massive power imbalance” between businesses and banks, Walker’s proposals were limited.
They did not extend to a compensation limit beyond £600,000, could not compel witnesses to attend, could not force disclosure of information, or deal with insolvency issues.
UK Finance, the trade body for British lenders, appointed Walker after a series of scandals highlighted the difficulties business owners faced in attempting to resolve banking disputes.
Stephen Jones, chief executive of UK Finance, said: “Simon Walker’s report provides a valuable contribution to the ongoing debate on how to ensure SMEs have the most appropriate access to dispute resolution options that are efficient and unbiased when they feel things have gone wrong in their relationship with their banks.
“As this review acknowledges, a number of important changes have been made in the industry, but clearly there is more that can – and should – be done.”
The APPG on Fair Business Banking welcomed several aspects of the review – it recognised the “massive power imbalance” between businesses and banks and the creation of a separate division of the Financial Ombudsman Service (FOS).
APPG co-chair, Kevin Hollinrake, said: “I welcome the fact that the review has recognised the ‘massive power imbalance’ between business and banks.
“However, this solution does very little to bridge the ‘access to justice’ gap.
“Around 90% of cases we deal with would fall outside the scope of this redress mechanism as the settlement limit is £600,000.
“Combined with this is the fact that this extended ombudsman would not have powers of disclosure and could not compel witnesses to give evidence.
“We are very concerned that this review has not properly considered the APPG’s Fair Business Banking for All report.
“It seems to criticise the tribunal solution, for instance that it does not deal with the legal basis for claims, when this is actually set out very clearly in the executive summary of our report.”
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