LONDON (Reuters) – Chancellor of the Exchequer Philip Hammond called on banks to strengthen a proposed redress scheme for small businesses, which lawmakers and victims argue is too soft on lenders.
A dispute service proposed by UK Finance, which represents banks, must include a broad range of interests and not impose a compensation cap, Hammond said in a letter released on Tuesday.
The voluntary scheme was proposed in response to a decade of campaigning by small firms who say they were mistreated by their banks in the wake of the 2008 financial crisis.
It is aimed at companies with a turnover of between 6.5 million and 10 million pounds which is above the eligibility threshold for taking complaints to Britain’s free Financial Services Ombudsman, leaving them facing a costly court case if they want to pursue a lender.
It includes a binding commitment on banks to pay compensation up to 350,000 pounds for “historic” complaints that date back to the financial crisis a decade ago, although the scheme could recommend a higher amount.
UK Finance, which declined to comment, is setting up a steering group to thrash out details of the new scheme, but lawmakers told Reuters this month it was too easy on banks.
Kevin Hollinrake, co-chair of the all-party parliamentary group for fair business banking (APPG), has said he would refuse a seat on the steering group unless concerns over eligibility, governance and claims limits were addressed.
Hammond, in a letter to UK Finance Chief Executive Stephen Jones, emphasised the need for the steering group to have “balanced representation” from banks, business representatives and other parties.
“It is vital that different perspectives are heard during this implementation stage, to ensure that the schemes are regarded as truly robust and independent,” Hammond said in the letter, which was dated Jan. 19.
Banks’ “default position” should be to pay whatever sum the new scheme awarded in compensation, Hammond said.
The APPG welcomed Hammond’s comments, saying: “We are particularly pleased that the Chancellor has set an expectation that the bank’s default position should be that there is no cap on the amount of compensation awarded.”
(Reporting by Huw Jones and Iain Withers; Editing by Alexander Smith)