Banking Misconduct and the FCA

Giles Watling Excerpts

Thursday 10th May 2018 Commons Chamber

[Giles Watling (Clacton) (Con)]

It is an honour to follow the hon. Member for Cardiff West (Kevin Brennan). Let me thank the hon. Member for East Lothian (Martin Whitfield) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), along with the all-party parliamentary group on fair business banking and finance, for securing the debate. This is an incredibly significant issue. As we have heard this afternoon, it has affected many of our constituents, and one of my own, Julia Barrington-Fuller, has informed me that she has been caught up in this terrible episode.

I am here to support a motion that will ensure that if it all goes wrong, such victims of banking malpractice, who, by definition, tend to have limited financial resources, can have sufficient access to justice. I am also here to support a motion that will help us to learn the necessary lessons from this painful episode, while beefing up and altering the powers of the Financial Conduct Authority, which is not up to scratch. Above all, I am here to support a motion that will increase confidence in our financial system, in which small and medium-sized enterprises currently seem to have little faith, as they are reluctant to borrow from financial institutions. That, in turn, has a negative impact on productivity and growth, and anything that has a detrimental impact on the Great British economy is simply unacceptable.

It is clear to me that passing the motion would go a long way to deliver change by creating an environment in which some of our financial institutions are no longer able to abuse hard-working business owners. That is, unfortunately, what we saw in Ms Barrington-Fuller’s case. There have been clear examples of mis-selling during her dealings with the Royal Bank of Scotland. For example, she asked RBS for a fixed-rate loan in 2008, but was instead given an agreement that included swap protection for 10 years. That meant that her business was now fully exposed to interest-rate variance, leaving it with crippling monthly swap payments of £7,000 per quarter, on top of her loan repayments. Moreover, the continuation of the loan agreement was dependent on an RBS renewal after five years, which was then refused. As a result the swap agreement was broken, and the penalties for breaking that agreement were levied—penalties that Ms Barrington-Fuller was told did not exist when she took out her loan.

Those penalties and charges forced Julia Barrington-Fuller and her brothers to close their family business, while RBS is continuing to seek a repayment of £250,000, along with any moneys outstanding on the loan and six years’ interest. In her words,

“these people are deceiving small businesses and ruining lives for their own personal gain.”

[Jeremy Lefroy (Stafford) (Con)]

Does my hon. Friend agree that poor lending practices and the selling of interest-rate swaps, combined with no examination whatsoever—absolutely no redress apart from, perhaps, repayment of the cost of the swaps—has forced some of our constituents, such as my constituent Mr Steve Gray, to close their businesses?

[Giles Watling]

I do agree, and that is why I am supporting the motion today. Julia Barrington-Fuller requested an agreement, but that was not the agreement that she finally received. We must have an inquiry into this misconduct; we must ensure that there is sufficient compensation for victims; and we must ensure that the Financial Conduct Authority is truly fit for purpose. We can only rebuild trust in our financial services by ensuring that institutions are held responsible in situations like the one I have described.

We hear too often about how our banks have been caught up in yet another scandal, the victims of which are not the bankers themselves but the hard-working people who rely on them to support their aspirations. People like Julia Barrington-Fuller and her brothers, who ran a successful business, are now struggling in circumstances not of their making. It is so disappointing that we are constantly revisiting this situation, especially in the case of RBS. This is a bank that the taxpayers paid £45 billion to bail out, and which now appears to be seeking to exploit those very taxpayers. It seems that the banks have learned nothing from the 2008 crash, an episode that Simon Jack of the BBC described this morning as

“the biggest banking debacle in UK corporate history.”

Indeed it was. It would appear that, if anything, all that the banks have done is move from a period of selling risky products to a period of mis-selling. Banks cannot be allowed to conduct their business in that way.

What is, perhaps, more ironic is that the loan that Julia Barrington-Fuller and her brothers took out was taken out as a matter of convenience rather than necessity. I understand that they did not need it as such. However, because of RBS misconduct, it was not long before they were in serious financial trouble, which led to their being put into RBS’s Global Restructuring Group. GRG, as we all know, was supposedly there to deal with firms that were in financial trouble, but there was no attempt to rescue the firms once they were put there. Instead, it is alleged, its focus was on liquidating companies rather than supporting them through further prudent lending. That is not good for business, and not good for the country as a whole.