Speaking before the Treasury Select Committee this morning (31 October), the FCA’s chief executive Andrew Bailey said the proposals would represent a “fundamental change” in the nature of the Fos.
He was speaking after addressing the issue of Royal Bank of Scotland’s treatment of small businesses.
Last week the regulator published an interim summary of the independent review into the bank’s Global Restructuring Group, which was accused of artificially distressing otherwise viable businesses and putting them on a journey to administration, receivership and liquidation.
RBS, following the publication of the review’s findings last year, announced a new complaints review process overseen by Sir William Blackburne, a retired High Court judge.
Speaking this morning in front of MPS, Mr Bailey said: “I have been on record for some time now saying I would much prefer this process was not done on a voluntary basis.
“Let’s be clear: that’s not because I think the firm is doing it wrong, but for a couple of reasons.
“I do sympathise with the complainants that you can never get away from the fact that in this set-up the firm sets the scheme up, the firm appoints the people who deal with it and, although we go to lengths to say it has got to be done robustly, I think we would be better off if we got away from that.
“The second point I would make is that it just doesn’t seem to me to be sensible that every time we get one of these things happening we have to set something new up.
“I think it would be much better if we had a standing scheme. We are planning to put out a consultation on this in the near future.”
Mr Bailey said there were two approaches to this issue and his initial preference had been for a formal system which would require legislation.
But he came to the view that legislation would be unlikely “in the current situation” so the FCA has moved onto another option, which is extending the ombudsman scheme.
He said: “That will have to tackle three issues. One is the scope of the ombudsman scheme because currently is only covers what tend to be called micro-enterprises.
“Secondly, it will have to address the issue of the award limit because the limit is currently £150,000 and thirdly, I think it has to address the question of the ombudsman conducting arbitration or mediation because this is not the classic PPI where you deal with it after the event.”
When asked whether the Fos had the skills at the moment to address these issues, Mr Bailey said it might not and said many of the cases it would handle under the proposals would be “very bespoke”.
Mr Bailey said: “I have talked to Caroline Wayman [the chief ombudsman] quite a bit about this.
“She is well aware of this but this will be an important point to be addressed in this consultation.
“This is quite a change to the nature of the service that they provide.”
In November 2013, Lawrence Tomlinson, then entrepreneur in residence at the Department for Business, Innovation and Skills, claimed RBS artificially distressed otherwise viable businesses and through their actions puts them on a journey towards administration, receivership and liquidation.
The following year in January 2014 the FCA announced a review of the conduct of GRG.
Last week’s publication was a summary of that review which was completed last year, and which found that while RBS did not set out to artificially engineer the transfer of companies to its business support division, there were “isolated examples” of poor practice.
These include the failure to support SME businesses “in a manner consistent with good turnaround practice” and focusing too much on pricing increases and debt reduction “without due consideration to the longer-term viability of customers”.
Last week RBS said it had made refund offers for complex fees of more than £115m and the cumulative cost of the measures it has taken in response to this issue have been £440m.
Article is care of Ft adviser.com and the original article can be found here.