Opinion: Andy Agathangelou

I run a certified social enterprise for people who have been shortchanged by the financial sector, many of whom are scam victims. Some members are angry about the Business Banking Resolution Service (BBRS). I think their views are justified and the purpose of this article is to set out why.

The BBRS was established to handle compensation payable to victims of malpractice by UK banks. It has been severely criticised by many stakeholders.

For example, consider these comments by Kevin Hollinrake MP, when chair of the All-Party Parliamentary Group on Fair Business Banking: “Heavily restricted eligibility rules” were to blame for the scheme’s poor performance; these rules had “conspired to avoid the very things we’ve campaigned so long and hard for – justice and compensation for those who’ve been denied it under previous flawed redress schemes”. 

He added “Quite frankly, the scheme is currently a shambles and a complete embarrassment to UK Finance and the seven member banks who designed it.” And: “The APPG warned them all in writing in 2018 that the eligibility criteria would exclude at least 85% of complainants and that’s proven to be the case.”

Scottish lawyer Cat MacLean, who resigned from her role on the BBRS’ SME Liaison Panel has also been reported as having been critical of the organisation, with the Times reporting that she had “significant concerns about [her] professional credibility” if she remained on the panel, and that she had concluded that the BBRS was “completely defective”. She quit her role on the panel in May 2022 and has not spoken publicly about the organisation or her involvement since.

These were strong words for sure from a respected MP, who is now Parliamentary Under-Secretary of State for Enterprise, Markets and Small Business, and a Scottish lawyer with extensive subject-matter expertise and dispute resolution experience. Both are credible witnesses to what has been going on.

So what’s wrong with the BBRS? I believe it has three significant problems:

Insufficient independence: The governance structure of the BBRS means the directors are not truly independent. The participating banks fund it, and they also created a company, known as the Bank Appointed Member, jointly owned by them, that has the power to block the directors from exercising key powers they would normally be expected to hold. There are also concerns about the independence of some of the adjudicators who are former bank employees who sold interest rate hedging products or are accused of otherwise mistreating SMEs. The conflict of interest issues here are astonishingly bad. 

Too restrictive eligibility criteria: This means almost all prospective claims are excluded, so the BBRS has failed to achieve its central purpose – to handle fairly a meaningful number of cases. UK Finance estimated that some 60,000 firms would be within scope for the BBRS’s historical scheme, which in theory deals with legacy misconduct cases such as RBS’s Global Restructuring Group, HBoS Reading, interest rate hedging products mis-selling, Lloyds Business Support Unit, bank signature forgery cases and more. But in fact, with that scheme due to close to new applications on 14 February 2023, the number of adjudicated cases resulting in financial awards was just 18 according to the BBRS’s own figures published in November. 

Trust and confidence not being restored: One of the stated objectives of the BBRS was that it would lead to trust between SMEs and the banks being rebuilt. I guess I’m stating the obvious here, but it’s clear that hasn’t happened. It could actually be even worse, if there are open, festering wounds not being treated properly.

What should be done now? I believe those calling for the BBRS to be scrapped are right, because too many prospective claimants just don’t trust it.

It needs to be replaced with something that is truly independent, where both sides can have their case properly assessed. We came close to the right solution back in 2018, but an opportunity was missed. 

Then, following a review, the Financial Conduct Authority commented: “We have publicly stated our support for a tribunal that could deal with disputes that fall outside the ombudsman service’s remit. We see a role for both an extended ombudsman service and a tribunal, as they meet different needs. For example, the ombudsman service’s expertise lies in providing a quick and informal process for financial services disputes. A tribunal, on the other hand, would provide a more formal, court like approach for some higher value disputes, or disputes involving complainants above the ombudsman service’s eligibility thresholds. However, we do not have the power to set a tribunal up. This would require primary legislation and is therefore a matter for the Government.”

But instead of the Government moving in that direction, it pursued the alternative proposed by UK Finance, the banks’ trade body, which led to the BBRS. It’s time to scrap the BBRS and to introduce a proper independent tribunal service, along the lines that Richard Samuel, barrister of 3 Hare Court, has been proposing for years.