RBS Global Restructuring Group and SMEs

Christian Matheson Excerpts

Thursday 18th January 2018 Commons Chamber

[Christian Matheson (City of Chester) (Lab)]

Much as I support calls for a tribunal system and an inquiry, the longer I listen to the debate, the more I believe that there has to be much greater involvement of the police in what are clearly criminal conspiracies—particularly, perhaps, in relation to agreements between valuers and the banks to drive down the values of properties. The hon. Member for Thirsk and Malton (Kevin Hollinrake) is absolutely right that while we cannot forget the personal damage done to small business owners, this is an attack on the whole of the UK economy, which is underpinned by those small businesses. It should therefore be taken seriously in criminal terms at the national level.

My constituent Graham had his business destroyed by Clydesdale and Yorkshire bank, which unlawfully mis-sold tailored business loans to him and to other SME customers. The selling involved widespread and systematic unlawful conduct, including making deliberately false representations to coerce customers into taking on the obligations under tailored business loans. Customers were not told about any interest rate swaps associated with or embedded into their tailored business loans, nor were they given the bank’s standard terms and conditions before or at the time of entering into the TBL. There was no mention of potentially substantial early termination penalty charges—break costs—allegedly associated with such interest rate derivative products.

As a result of this mass mis-selling, customers of these banks have suffered significant financial losses. The hidden break cost liabilities asserted by the banks meant that it became virtually impossible for customers to pay off their TBL completely or to switch their borrowing to another bank, as the hon. Member for Dundee East (Stewart Hosie) said. SMEs were therefore locked-in victims, forced to continue paying interest rates as high as 6% or 7% on these loans when the base rate was reduced to 0.5%.

SMEs were subjected to various other forms of abuse, including the manipulation of property valuations mentioned previously, which resulted in alleged covenant breaches of the loan-to-value ratio on the property underpinning the loans, as well as the unlawful repossession of properties, the manipulation of overdraft facilities to exert additional pressure, the unfair imposition of inflated bank charges and the unlawful calling-in of personal guarantees. It is no wonder that so many small businesses, and the families underpinning them, have gone under in these intolerable circumstances.

From investigating Graham’s case and those of other constituents, I, like other hon. Members, am absolutely clear that the Financial Ombudsman Service is not fit for purpose, perhaps because it lacks the skills to understand these very complicated financial instruments, perhaps because it is under-resourced, or perhaps because it lacks the political will and is too close to the banks. It could also be—the Minister may want to consider this—that the legislative regime under which it operates is not sufficient and that it does not have sufficient scope.

I have one final point to make. This scandal has been compared to the PPI scandal, but I think it is in a league way beyond it. Adding extra money to somebody’s payment protection insurance and then skimming some off the top is one thing, but deliberately driving down, crashing and destroying somebody’s business, to which they and often their families have dedicated their lives, is in a league beyond anything we can comprehend. I return to the point I started with: this is criminality and it should be dealt with as such.