U.K. policymakers, or Members of Parliament (MPs), are slamming financial institutions (FIs) for their treatment of small business (SMB) borrowers, and are calling on the government to overhaul business lending regulations as a result.
Reports in Reuters late last week said the U.K. Treasury Select Committee criticized big banks’ treatment of small businesses as “scandalous” following government investigations — and discovery of — SMB mistreatment at some of the nation’s high-street financial institutions (FIs). Lawmakers pointed specifically to the “untold misery” endured by small business owners forced into the Royal Bank of Scotland‘s (RBS’) Global Restructuring Group, some of which were then pushed to bankruptcy, a previous probe had found.
In the midst of the RBS scandal, government officials faced scrutiny for failing to take enforcement action against the bank. RBS itself had pointed to a lack of regulation for why it emerged relatively unscathed, even after MPs found misconduct against small business clients. The Financial Conduct Authority (FCA) does not have the regulatory power to sanction FIs over SMB lending because commercial lending is not regulated by the body, reports explained.
According to reports, the committee published a 64-page report on small business lending and said a Financial Services Tribunal will be formed to hear small businesses’ complaints regarding financial services. At the same time, the report rejected a proposal made earlier this month that suggested for the Financial Services Ombudsman to expand its ability to hear and remedy complaints from small business borrowers.
The committee is also urging the FCA and the finance ministry to introduce a regulatory framework that would expand borrower protections to include small businesses. “Waiting for another high-profile misconduct scandal before pursuing it would be irresponsible,” the report said.
In a statement, the finance ministry said it would carefully consider the committee’s report.