There has been much debate and controversy about Bank’s delaying payments to SMEs who had been mis-sold derivatives, because of having to combine the actual redress payment (assuming one is due!) with the consequential loss payment. There have been continual inconsistencies between the FCA and the Banks who kept blaming each other saying they they were or weren’t allowed to separate the payments.
As recently as 4th September 2013, the FCA’s Chief Executive Martin Wheatley told Harry Wilson from the Telegraph he agreed with the approach of this split payment
Responding to criticism that many businesses were being told by their banks they would not receive compensation payments unless they agreed to settle claims over so-called consequential losses, Mr Wheatley said he agreed with this approach.
“It is right that this should be dealt with in one go. The last thing we want are cases rattling along for years,” he said.
At the time, we felt this was a strange comment because whether there is one payment combining consequential losses or not, should not affect the length of the overall process because the same level of assessment still has to be made. However, combining the payment does mean a further delay for the SME which potentially could have been mi-sold the product 12 years ago, and every week can be critical let alone months.
However, on 7th November, the FCA stated:
As part of this, the FCA have agreed with HSBC, RBS and Lloyds Banking Group to split payments for initial redress and consequential loss, and have encouraged other banks to follow their lead. This decision should simplify and speed up the process for paying basic redress to customers. The FCA will be closely monitoring this to ensure it is having the right impact.
So to be clear, on 4th September the FCA was defending (despite criticism) the decision to combine the payments.
Then two months later, the FCA has agreed with the banks that payments should be split and welcomes the move?
In fact, was it not the Parliamentary back-bench debate led by Guto Bebb MP on the delay of the FCA review scheme on 24th October that caused the banks to make these announcements?
There was a flurry of announcements within 48hrs before the debate taking place by HSBC, Lloyds and RBS that they had decided to split the redress payments (one of our derivative experts was with Guto Bebb MP when the news was received from one bank, 18 hrs before the debate!).
Does this show that we cannot rely upon our regulator alone, and that we need the continual support / pressure from our MPs to make real and effective change?