APPG Banking

March 7, 2017

APPG Banking

By Michael Muldoon

The All Party Parliamentary Group (“APPG”) on Fair Business Banking launched in January 2017. I travelled to London with Kara Britton and Kalvin Chapman for the launch night.

What Is The APPG?

In 2008 many western banks collapsed, and this had a knock-on effect cross the economies of the western countries. Parliament played a crucial role in investigating what had happened and directing how the banking industry could be fixed to stop or minimise another collapse.

In 2012 the public became aware of the duplicitous actions of the banks in regards to the sale of Interest Rate Hedging Products to SME businesses across the UK, as the FSA (as it then was) launched a review into the sales. Then we became aware of the full extent of LIBOR manipulation by banks and broker. In 2013 we became aware of RBS’s treatment of businesses allegedly in distress in its GRG division. We became aware of the sale of business assets by banks to Cerberus. In 2014 we became aware of how the banks and brokers had manipulated Foreign Exchange benchmarks.

The work done by Parliament in regards to the problem of how to fix the banking industry and stop another economic disaster was fantastic. What was not so fantastic was the way in which SME businesses have been treated. Despite the herculean efforts of the Treasury Select Committee and numerous MPs, most notably Gutto Bebb, SMEs in 2017 have no means of fighting back against the Banks. The vast majority of SME claims against the Banks that come to the Courts have been lost, though a very large number of credible claims were all settled out of Court.

It became obvious that something needed to be done about the failure of the Government and the Financial Conduct Authority (“FCA”) to offer any form of protection to SMEs. A sole trader is viewed by the Courts in the same way as a sophisticated business. There are very few rules to protect SMEs when dealing with banks, virtually no regulation governing commercial banking and most contracts contract out any obligations or duties owed by the Bank to SMEs. This lack of regulation and rules allowed banks to sell substantially damaging products to SMEs whilst the SMEs believed that their bank managers were working with them and would never do anything to harm them. Sadly, the lure of large bonuses and a competitive work environment led to the sale of substantial numbers of damaging products.

So, the APPG on Fair Business Banking has now been formed. It is a group of MPs from the Conservative, Labour, SNP and Plaid Cymru parties. The Group is chaired by George Kerevan.

The Aims of APPG

The aims of the APPG on Fair Banking are:

  • Engaging with businesses, their legal and professionals advisers, financial firms, trade bodies, campaign groups, journalists, academics and think tanks, to create a body of research and data for evaluation, discussion and dissemination.
  • Studying past issues of misconduct to identify areas in the regulation and culture of the financial sector that are failing businesses.
  • Raising greater awareness and challenging misconceptions, inside and outside the Houses of Parliament, on the factors affecting businesses, including access to finance, ongoing banking practice and business support, and the involvement of turnaround specialists and insolvency practitioners.
  • Highlighting the consequences of bank misconduct, from the mental health of people in business to the wider damage to the competitiveness of UK business.
  • Providing a resource for parliamentarians requiring information and assistance for affected constituents.
  • Putting forward recommendations for positive change and, where necessary, pushing for regulatory and legislative reforms to ensure that effective safeguards are put in place to reduce the likelihood of problems arising again in the future.
  • Identifying opportunities to promote clarity, transparency and accountability within the banking system in order to provide a platform on which trust between the finance sector and business community may be built.
  • Keeping the parliamentary spotlight on the key issues via questions, debates and submissions to committees.
  • Maintaining broad media engagement to ensure more widespread and effective communication of the key issues of finance, banking and support for businesses.

Muldoon Britton

Kara Britton and I set up Muldoon Britton in 2014. We have both acted on behalf of individuals and SMEs against banks for many years. We have both worked on substantial claims on behalf of SMEs. We continue to do so, quite successfully.

We asked to be associate members of the APPG, and we intend supporting them in their work.

We have both substantial history of fighting banks together with on-going cases against the banks. But, importantly, we have seen cases historically where a potential client had to be told that their claim against the banks would be unlikely to succeed because of the unequal and unfair laws governing the relationship between banks and SME customers.

A very good example of this, which was not one of our cases, is Crestsign v National Westminster Bank Plc

[2014] EWHC 3043 (Ch). This case was heard in July 2014 and judgment was handed down on 26 September 2014. The bank had acted appallingly. The Judge was scathing about how the director of Crestsign had been treated. However, as the COBS rules do not apply, because Crestsign is a limited company, the Court could only rule on the case based upon the contracts. The contracts (the ISDA agreement terms) said that the directors of Crestsign would not rely upon anything said or done by the bank and would go and seek independent advice. The directors actually thought their business manager was acting in their interests and would not, effectively, sell them something that would damage their business. 

It was expected that Crestsign could change the law at either the Court of Appeal or Supreme Court. The findings of the Court were damning, but the Court could only find in favour of the Bank because of the current common law. It was believed that a Court of Appeal decision or a Supreme Court decision could change that. All that was needed was a sympathetic Court of Appeal or Supreme Court and the rules governing commercial banking relationships could be changed. Unfortunately for the law, Crestsign settled out of Court in a confidential settlement. The law remains.

It is for this reason that we wish to work with the APPG on Fair Business Banking. It is unfair that a bank can give the appearance of giving advice but hide in the small print that it was not. It is exceptionally unfair that the rules governing the sale of many products (known as the COBS rules) cannot give rise to a claim in law where the rules are breached, despite that they can and do for individuals. Small SMEs are, more often than not, just individual entrepreneurs who have set up their businesses and do not have sophisticated knowledge of contracts and finance. It is unfair that they have no more rights than a multi-national, which could afford to pay for the best advice and always have sophisticated financiers and economists on the pay-roll.

As well as fighting for our clients in the Courts, we also fight for them by working with entities such as the APPG. We will keep you updated on our website of the work we do, and the work that the APPG does.

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