Major high street banks HSBC and RBS were both the subject of serious allegations over their treatment of small business consumers last month. As lawyers, regulators and commentators attempt to get to the bottom of the situation, we take a look at the implications for SMEs.
On 25th August, the BBC published information about a leaked report by the Financial Conduct Authority (FCA), which claimed an RBS department set up to support struggling firms had engaged in 'inappropriate behaviour'.
The subsidiary, Global Restructuring Group (GRG), operated from 2005 to 2013 and handled as many as 16,000 companies. RBS customers were passed onto GRG when they missed loan repayments or reported significantly reduced profits, but just 10% of those returned to RBS. The remainder were either locked into complex loans with high interest rates, put into administration or liquidated.
Separately, HSBC is being accused of freezing or closing the accounts of hundreds of small firms for up to seven weeks. Numerous companies are reporting problems with their supply chain as a result of the action and several have suggested that HSBC has been to slow in responding to their complaints.
The bank was reportedly tightening money-laundering rules following a £1.2bn fine from US authorities. It claimed that account closures only happened when clients were slow in answering requests for information.
In both instances, observers claim the banks have been riding roughshod over large numbers of small customers – suggesting that this is a problem to be addressed by regulators. However, the FCA has said there’s little it could do about GRG because much of the RBS subsidiary's activity falls outside of its remit. Equally, critical MPs appear to have elicited less of a response from HSBC than their US counterparts.
With little immediate help from outside sources, small businesses would be wise to keep a close eye on banks wherever possible. Responding to communications quickly has clearly become paramount. If you feel mistreated, seek immediate advice from independent sources and, if you suspect you may run into difficulties with securing your cashflow, take steps to ensure you secure all of your finances.
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