7. 7
A conscious process of deceit:
• Identification of the SME owner
• Asset rich
• Borrowing requirement
• Limited financial expertise
8. 8
A conscious process of deceit:
• Timing of approach
• The perception of need
• It is a requirement
• Salesmen presented as advisors
• Presented as “no cost” alternative
9. 9
A conscious process of deceit:
• Non-disclosure of Contingent Liability
calculation
• Non-disclosure of CL’s impact on
borrowing capability
• Non-disclosure of bank’s profit
10. 10
A conscious process of deceit:
• Non-disclosure of incentive
arrangements
• Standard form documentation
inconsistent with facts
• Libor
11. 11
IRSA’s are inappropriate for
SMEs:
• Longer than associated loan
• Greater value than associated loan
• Terms enabling bank to terminate
• Exclude Margin
• Risk of substantial cost of termination
– SMEs require termination at modest
cost
15. 15
Our achievements:
• Members contacting and meeting
MPs
• Submission of survey results to MPs
• Alliance with MPs - Back Bench
Business Debate in Parliament
• The FSA Investigation
16. 16
Bully-Banks’ 14 Point Plan:
• Roll over of IRSA payments
• Maintenance of banking facilities
• Relief from VAT and NI payments
• Definition of mis-selling
• Timetable
• Information from banks
17. 17
A simple definition of mis-sale:
• Over hedging – value and term
• A requirement of loan
• No information re break costs
• Mis-description of Derivatives Expert
• Unsuitable given educational
background or work history
• Unsuitable given future plans
19. 19
“Serious Failings in the sale of
IRSAs to small and medium sized
businesses and that this has
resulted in a severe impact on a
large number of these
businesses.”
20. 20
Failings:
• The bank’s decision whether there
has been a mis-sale
• The bank to decide what constitutes
“reasonable redress”
• No clear process
• No timescale provided
• No urgent relief
21. 21
BB’s Subsequent Actions:
• Lobbying
• Met with the FSA
• Met with Ministers & Shadow
Ministers
• Met with the Treasury
• Met with four banks
• Conferences
22. 22
• Until January 31st
no evidence that the
FSA Scheme will provide a solution
• We are planning on the basis that the
banks will continue to be
unresponsive and intransient
• We continue to plan on the basis that
the regulator will let us down again
24. 24
The Company’s objectives are:
• to represent the interests of SMEs adversely affected by
the sale of financial products (including Interest Rate
Swap Agreements and other derivative instruments) to
them by their banks,
– in their dealings with their banks following the sale of such
financial products,
– in their dealings with government, financial regulators etc in
connection with the sale of financial products to them and the
adverse consequences thereof.
• to prompt a change in the culture and processes of:
– banks in their treatment of small and medium sized businesses
so that ordinary people in business are protected from the unfair
actions of their banks, and
– of the relevant financial regulators so that in the future they
vigorously and properly protect ordinary people in business
25. 25
Our “Milk Stool” Strategy:
• Legal Campaign
• Parliamentary Campaign
• Regulator and the Banks
26. 26
Legal Campaign:
• Signal determination to banks
• Create pressure
• Preserve rights
• Best present the case
31. 31
Parliamentary Campaign
• Strength: individual contact with MPs
• Members must meet their MPs:
–To explain the issue and it’s
consequences
–To brief the MP by providing written
evidence from Bully-Banks
–To ask MPs to support the APPG
32. 32
Parliamentary Campaign
Objectives:
• Monitor the regulator
• Pressurise the banks to provide
urgent relief
• Pressurise the banks to provide
redress
• Prompt a change in the culture and
processes of the banks
33. 33
The Regulator and the Banks
• We seek tripartite conversations:
–Process of review
–Mis-sale criteria
–Principles of “fair & reasonable
redress”
35. 35
• Over 90% of Cases Mis-sold
• Definition of “Sophisticated” changed
• Criteria for “mis-sale”
• Baseline for “redress”
• Consequential Loss
• Suspension of Payments
36. Last week first proposals made
by two banks to small number
of customers.
Concerns:
• Substitution of IRSA by another IRSA
• Consequential loss
• Continuing bank facilities
36
37. 37
Separate Categories of
Member:
• Unsophisticated Borrower
• Sophisticated Borrower
• Embedded Swap / TBL
• Those in administration / liquidation
38. 38
Bully-Banks’ Role re
FCA Redress Scheme:
• Education / preparation
• Communication
• Monitoring:
– Review Process
– Banks’ Conduct
– Regulator’s Performance
• FCA & Ministers
39. 39
Bully-Banks’ Role re
Sophisticated Borrowers:
• Communication
• Group Organisation
• Sharing of information
• Sharing of evidence
• Use of Bully-Banks’ organisational
assets
40. 40
Bully-Banks’ Role re Embedded
Swaps / TBLs:
• Clarity from Yorkshire & Clydesdale
Banks
• Definition of the product and FSA’s
ability to review
• Campaign for inclusion in FSA
Scheme
41. 41
Bully-Banks’ Role re Borrowers
in Administration / Liquidation:
• Legal Research
• Potential Funding