Weekly Blog by Philip King, CEO of the ICM - 'End of term report: could do better'

Last week Professor Russel Griggs, Independent Reviewer of the Banking Taskforce Appeals Process wrote a guest blog and I'm grateful to him for sharing his thoughts ahead of the publication of his second annual report. It was an interesting blog and has prompted me to return to a theme I've written about more than once before: the need for greater awareness of the appeals process.

 

Despite the assurances I hear from senior bankers at government forums and elsewhere that the independent appeals process is being drawn to the attention of businesses who are declined loans, I hear too many examples where that clearly isn't the case. Not so long ago, I listened to a presentation by a regional bank executive who seemed unaware of the process at all and, more recently, one of our own ICM members shared his experience with me. After a 37 year relationship with his High Street bank, he was told that his overdraft facility was being withdrawn because it had decided to discontinue its relationship with all customers in that particular sector. He approached alternative banks and raised the issue with the Financial Ombudsman Service, several MPs, the OFT, and government ministers. Neither his nor the other banks, nor one of these parties pointed him towards, or made him aware of, the independent appeals process.

 

I've always said that banks must be free to make their own lending decisions and I've resisted all the voices suggesting that banks must be 'forced' to lend. I stand by that view. The appeals process was intended to create an environment in which businesses could be assured that a loan declined had been declined fairly or provide an opportunity for such decisions to be reviewed and reversed when appropriate.

 

I expect Russel Griggs' report to show the process is working well when it is used and this should be applauded, but it can't work if people don't know about it. The banks, and government, aren't doing enough to bring it to the attention of customers and the wider business, financial and political community. They must do better.

 

Weekly Blog by Philip King, CEO of the ICM - 'Pomp and circumstance'

Well, my wife Mary and I celebrated our 34th wedding anniversary last weekend. Although our celebrations didn't quite match up to those of the Queen's Diamond Jubilee, we nevertheless had a great time and it was good to have an extra couple of days off!  The royal pageantry was amazing and impressive, and I confess to being mesmerised by the way images were projected onto Buckingham Palace during Monday's concert. Even on television, it was simply awesome, and it was certainly one of the weekend's highlights for me.

On a more everyday subject, I was interested to read the report about bank loan appeals last week.   Professor Russell Griggs, who I know well, was appointed independent arbitrator under last year’s Project Merlin pact between Government and the banks, with a remit to adjudicate when companies with sales of up to £25 million feel that they have been unfairly refused credit.  Most appeals were from retailers, construction companies, restaurants and hotels complaining about limits placed on overdrafts or credit cards. Half of the amounts in dispute were sums of less than £5,000, although a few were higher than £1 million.  During the first year of the scheme, 114,000 applications (14 percent) were declined by the Taskforce banks, of which 2,177 were taken to appeal.  Of these, the report reveals that 39.5 percent were successful.

Professor Griggs says he thinks the numbers are reasonable, given that no one had any idea how many appeals there would be, but that the banks need to ensure all customers know they can appeal, which not all do currently and that needs to change.  He adds the suggestion that, if more knew they could appeal, there is a possibility more might apply for credit in the first place.

That is perhaps one of the most worrying comments in the whole report.  My experience of talking to many SMEs is that there is limited awareness of the appeals process, even from companies who genuinely believe they, or their financial numbers, have been misinterpreted by a banker.  We can all play our part in making small businesses aware of the process, details of which can be found at: http://www.icaew.com/~/media/Files/Technical/Business-and-financial-management/SMEs/BBF%20Factsheet%20Appeals%20Process.ashx