A new report published today by Simon Walker, former Director-General of the Institute of Directors, recommends new routes for Small and Medium-sized Enterprises to challenge banks without going to court.

Appointed by industry group UK Finance as the independent chair of the UK SME Complaints and Resolutions Review, Mr Walker makes four principle recommendations:

  • A new division within the Financial Ombudsman Service (FOS) tasked with resolving SME-bank disputes, and a new expert advisory body to advise the FOS on legal and banking issues
  • A voluntary ombudsman scheme to support larger businesses that are not ‘eligible complainants’ to the FOS, as well as a separate voluntary scheme to consider legacy SME-bank disputes that arose following the 2008 Global Financial Crisis and have not been eligible for other forms of dispute resolution
  • Real time data links between the bank ombudsman facilities, the Financial Conduct Authority (FCA) and key government departments to provide an early warning system against future malpractice
  • A formal process, supported by senior representatives of the major banks, that seeks to achieve reconciliation and closure where they meet a representative sample of affected SMEs, listen to and acknowledge the loss experienced by those businesses and commit to a new system of dispute resolution and other measures to ensure past issues do not infect their future relationship

This report follows a series of separate reviews since the Global Financial Crisis which have examined the conduct of individual banking groups and revealed inadequate provisions for SMEs seeking to resolve disputes with banks.
The new proposals aim to secure fair and effective non-court dispute resolution between banks and SMEs, as well as bringing closure to some victims of misconduct post-2008.

The report recommends that a dedicated SME division be created under FOS governance and within its legal framework. It advises that this division should handle all eligible disputes, including from small business and microenterprises, bolstered by the appointment of new specialist senior managers.

To support the new SME division of the FOS an expert advisory panel would be created to provide high-level guidance and deep expertise in complex banking disputes. This mirrors the existing FOS provision for consumer complaints. The new panel would provide data and feedback to the regulator and would be chaired by a retired judge, with the support of leading industry professionals.

Mr Walker’s proposed voluntary schemes to support businesses that fall beyond the remit of the FOS include a new facility to resolve disputes with businesses that are not currently eligible – businesses with turnover between £6.5m and £10m, and a number of legacy claimants whose cases have not previously been dealt with by courts or dispute resolution schemes.

Following the publication of today’s report, independent chair of the UK SME Complaints and Resolution Review, Simon Walker, said:

“In the aftermath of the Global Financial Crisis ten years ago, banks faced enormous pressure to reduce their risk exposure. Yet SME customers too often bore the brunt of this pressure and were clearly mistreated. With this report, our review seeks to provide a new route to redress for SMEs. Our recommendations would strengthen the infrastructure available to entrepreneurs wishing to challenge the behaviour of banks. Under the current system, too often SMEs have felt like David against Goliath.”

Review into the complaints and alternative dispute resolution (ADR) landscape for the UK’s SME market