Lloyds, HBOS and the Cranston Review

Jim Shannon Excerpts

Tuesday 4th February 2020 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

I apologise for not being on time, Mr Hollobone; I had a short-notice meeting with the Under-Secretary of State for Northern Ireland, the hon. Member for Worcester (Mr Walker) on Northern Ireland issues, and we had to go to meet him. I talk very fast, Mr Hollobone, as you know, but in the next few minutes I am going to get more words to the minute than any other person ever got, if that is possible. I hope I do not talk so fast that Hansard cannot follow it—I will certainly do my best.

On 18 December 2018, 13 months ago, we gathered here in Westminster Hall for a debate on the same subject of Lloyds HBOS, some nine years after the matter was first raised in the House in June 2009 by Sir James Paice MP. My substantive support for a proper and independent review of the Griggs HBOS bank-led remediation scheme is a matter of record in that debate. Less well-known is what has happened since, so let me put some of that on the record from my perspective today.

I begin by drawing the House’s attention to a few paragraphs of an excellent article that I read, by Helen Cahill in The Mail on Sunday on 25 January. Helen wrote:

“Sources said Horta-Osorio, who has been at the helm of Britain's biggest retail bank since 2011, is keen to salvage his reputation before departing as chief executive.

He has also halted three legal battles with victims in an effort to repair relations between the bank and its small business customers.

Victims have been fighting for fair compensation for more than a decade. Nikki Turner, director of victims’ group SME Alliance, said: ‘We have struggled with this for years. We hope this will encourage other chief executives to be more hands-on. How do you know what’s going on in the bank, if you don’t know about it personally?’”

Then, in what in my view will prove to be a seminal article, for Reuters last Wednesday, under a section entitled:

“Chief executives at a conduct crossroads”,

Rachel Wolcott wrote:

“Bank chief executives face a choice in 2020. They could take actions to resolve fairly disputes and claims stemming from past misconduct. That then would set the tone for how such problems are solved in future and reinforce cultural transformation messaging.”

There are a lot of things that can be done.

“Alternatively, they could continue approaches that resulted in unfair customer redress schemes, customer claims being wrongly denied, and vulnerable customers hauled through the courts.”

The article quotes Ruth Steinholtz as saying:

“They can’t have it both ways.”

They think they can, but they cannot. Ruth Steinholtz is further quoted as saying:

“They say they want to increase trust, but they can’t do that if they don't take responsibility for their actions and admit they got it wrong. I do think there has to be some sympathy for the reason they have difficulty admitting getting it wrong, which is they get slammed by the regulators every time they do”—

but if it is wrong, it is wrong and they should say that.

The article continues:

“The Cranston Review, which saw Lloyds Banking Group’s handling of HBOS Reading victims criticised, may have been a catalyst for that very change in approach required to take Lloyds’ cultural transformation work forward. Lloyds has invested in efforts to improve culture, making key hires and revamping its purpose, values and behaviour statement. Recent decisions by Antonio Horta-Osorio, chief executive to increase HBOS Reading fraud victims’ compensation, pre-empting further unflattering investigation results expected in the Dobbs Review, was deemed as a step in the right direction.”

It is, and it should be seen as such. The article goes on to say:

“If this approach continues to influence Lloyds’ engagement with mortgage prisoners, cases that come through the Business Banking Resolution Scheme (BBRS), PPI claimants and yet to be uncovered conduct problems, its chances of achieving meaningful cultural improvements may increase.

Barclays, RBS, Virgin Money and other UK banks have not made public any change in attitude towards legacy conduct issues, however.”

It is disappointing that they have not.

“Banks, via UK Finance, contested the eligibility criteria for the BBRS, which is aimed at putting SME mistreatment in the past.”

Regrettably,

“Most banks have made few meaningful actions to help mortgage prisoners or customers whose loans were sold to debt collectors and vulture funds.”

That includes Lloyds as one of the culprits.

“David Duffy, chief executive at Virgin Money Holdings, in contrast to Lloyds’ recent approach, has rebuffed the FCA’s Bailey’s specific requests to ‘deal with’ some of its most troublesome and longstanding SME customer disputes.”

Mr Duffy is noticeably where his Lloyds CEO counterpart was a few weeks ago, pre-Cranston, and in my view he needs to move his position to remove the shackles strangling this bank.

The Minister will be well aware of the case of John Guidi, the CYBG, now Virgin Money, hunger striker, and his recent correspondence, now publicised on Twitter and elsewhere, detailing the implications of both his case and many others. It is insightful to read the Reuters article by Lindsey Rogerson on 24 January, headlined:

“Outgoing FCA chief advocates for bank victims inclusion in new resolution scheme”.

That is good news.

The article addressed Andrew Bailey’s public and private view on both Mr Guidi’s case—I have probably pronounced his name wrong there—and those of the other victims of banks that are not yet participating in the BBRS, such as Zurich Dunbar. I ask the Minister, in his concluding remarks, to respond by giving his view and that of Government on the following observation by Mr Guidi:

“Meanwhile, the Vulture funds appear to be untouchable by the law yet they use their distorted version of law for their own benefit to destroy the honest and hardworking, tax paying SMEs and individual people of this country and leave them destitute as a burden on the state while they themselves pay no taxes in the UK, Ireland or anywhere else.”

I turn now to an instance that I witnessed, together with our voluntary adviser, Brian Little at Westminster for Banking, who has assisted with auditing and whistleblowing since that December 2018 debate. I was approached by Lloyds Banking Group’s public affairs director, Mr Benedict Brogan, who asked to speak with us about the content of various parts of my speech, which Brian and I were very willing to do. Our first meeting took place immediately on the resumption of Parliament after Christmas 2018.

A number of matters were discussed, including—specifically relevant to the debate—the importance of a meaningful and competent review of the Griggs scheme, together with the crucial involvement of victims’ representatives in the recently announced dispute resolution scheme, now called the Business Banking Resolution Service. From our experience in Northern Ireland, we believe that all the people cannot really move on until the victims’ aspects are properly considered and a closure and reconciliation process undertaken, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) mentioned; I only caught the tail end of his speech, but I have spoken to him about this. He and I both requested this debate, and I am pleased that we got it.

As a result, over the next couple of months, Mr Brogan engaged with other banks, and centrally Mr Horta-Osório suggested that Nikki Turner of the SME Alliance be invited to join the independent steering group, or ISG. Bearing in mind that Paul and Nikki Turner had been the subject of 22 applications for eviction by Lloyds, and that the Lloyds CEO was subjected to calls for his resignation in Parliament in that December debate, this was an enormous ask, and impossible in many people’s eyes; in effect, a few of us were thought of as mad. We understand that, when António was approached on the subject, after several seconds of reflection and following his interview by CNBC in Davos in January 2019, he looked up and said words to the effect that “it was the only way forward”, and so it is.

Shortly afterwards, on 12 March 2019, Nikki and the SME Alliance released to the press that they had been invited and were joining the ISG of the DRS. That press release also referenced Mr Ian Lightbody from the CYBG Remediation Support Group. Unfortunately, the DRS chairman, Mr Lewis Shand Smith, did not follow Ian’s involvement through, despite another small business representative board member from Make UK being unable to attend. That was, and remains, a huge disappointment to Financial Conduct Authority CEO Andrew Bailey, the SME Alliance and the all-party parliamentary group on fair business banking.

Despite the time pressures across many fronts on Andrew Bailey, who is soon to be Governor of the Bank of England, we witnessed his personally taking charge of the interviews for the chair of that review with an unwavering commitment to the values and intent of that process, which we welcomed. After a couple of challenges in securing other candidates, Sir Ross Cranston was selected. He has proven to be exactly what was required—independent, evidence-led, competent, fair and robust. I put on the record our thanks and gratitude to both Andrew Bailey and Sir Ross Cranston for their work on this in 2019. I must also add thanks to the Lloyds CEO, Mr António Horta-Osório, who devoted some of his time to overseeing not only the HBOS aspect of this but the treatment of other victims, such as victims of Lloyds business support unit. I wrote to António to thank him personally on Monday 20 January.

Yes, Rachel Wolcott is right: bank chief executives are at a conduct crossroads in 2020. How true that is. This is the year that their actions, including active support for the BBRS, will communicate to their staff, the victims and the public at large whether cultures are really changing.

My final point relates to a victims’ conference I attended and spoke at on 17 September last year in London, where I heard Brian Little tell a story to victims that got everyone’s attention. It is on YouTube; most things seem to be nowadays. Back in 2011, Brian was a constituent of mine, and he still is. He had a mental breakdown for some 17 months, during which time I, as a new MP, and with my parliamentary aide, assisted in keeping his whistleblowing case alive during his diagnosis and recovery.

During that time, we met the now-Lord Andrew Tyrie, in his role as Chairman of the Treasury Committee, in relation to independent reports and assessors. By coincidence, António was the subject of stories on the front page of The Daily Telegraph on 4 May 2011. While only just in the CEO role, António had taken the brave step away from the UK Finance position on PPI and stated that Lloyds must address the compensation issue. Back then, that was perhaps £5 billion to £10 billion across the banks; it is now more than £50 billion, but it was the right thing to do. Brian’s story was about cover-ups in reports; the court eventually found that he had made 12 protected disclosures.

On Saturday, I read an article in The Times in which Katherine Griffiths wrote that António was now the longest-serving CEO in the FTSE 100, and that the search for his successor is imminent. Whether accurate or not, I ask through this House that Mr Horta-Osório continues what a number of us have witnessed in the last few months: personal involvement and oversight of the Cranston compensation review and active support for the BBRS, and perhaps even the involvement in a closure and reconciliation process at Lloyds, which we would be more than happy to discuss with him prior to any departure or retirement.

I am conscious of the time, so I will scoot forward to near the end of my speech. In relation to third-party debt, can I ask that the Minister takes similar action immediately? Most of this will not be about individual cases, but I am concerned that the BBRS will not be ready in time to hear the case of Nigel Henderson, as he is terminally ill. While the Minister consistently states that he is unable to address individual cases, which I understand, I should think that he would wish to publicly endorse the emergency cases policy of the BBRS that James Hurley reflected in his recent article in The Times, in which he wrote:

“Bosses of the service have been asked to prioritise cases where business owners are terminally ill and where there are imminent repossession or bankruptcy issues.”

It is morally right to do that, so why should we not?

An open letter to the Prime Minister last Wednesday from the Banking Victims for a Future groups stated:

“The objective is to have Banks put things right, redress customers, where they should be redressed, and continue to reinforce our work that Banks really need to earn people’s trust. Without this redress through a credible Business Banking Resolution Service (BBRS) followed by an appropriate closure and reconciliation process, within each bank, for the last 20 years we will not help this nation and its people, through many small businesses, PROSPER in a post-Brexit United Kingdom.”

Everybody will want that, whether they are in favour of Brexit or not.

I will conclude with this comment from UK Mortgage Prisoners:

“We do not want to be left behind within our Prime Minister’s hope for our nation. We didn’t deserve this and should not continue to suffer. We insist that our ‘People’s Government’ provide a solution and reflect it in the chancellor’s budget speech on 11th March 2020, to the nation”.

I look forward to hearing the Minister’s response to my two key points and to whether he endorses these aspirations of the Prime Minister. I thank you, Mr Hollobone, and hon. Members for enduring my speaking at 60 words to the second, or thereabouts.

--- Later in debate ---

[John Glen]

My hon. Friend makes a powerful point, which goes to the core of this matter. The Cranston review points to the fact that we now have a higher bar of expectations in terms of how these redress schemes should be operated in a transparent way. He has spoken in this debate and previously about the distress that has been caused to his constituents, and many other Members have also made points during this debate.

The wider banking industry has a responsibility to reflect on the review’s findings and act accordingly, so I welcome the banking industry’s commitment to creating a new scheme to address unresolved historic complaints from small and medium-sized enterprises that have not been through a formal independent process, and to address future complaints made by slightly larger SMEs that are just outside the remit of the Financial Ombudsman Service.

[Jim Shannon]

Will the Minister give way?

[John Glen]

I will in a moment.

The aforementioned Business Banking Resolution Service opened to expressions of interest last November, ahead of its full launch later this year. Meanwhile, the expansion of the FOS last April means that over 99% of all SMEs now have access to fair, free and fast dispute resolution.

The hon. Member for Strangford (Jim Shannon) asked me to give way; I am happy to do so, but I want to refer to the points that he made. He referred to the eligibility of the BBRS. It is not for me to determine the eligibility of the BBRS, but his points about the prioritisation of cases will have been heard very clearly by those who have set up that service, and I urge the BBRS to reflect on his contribution to this debate.

The BBRS and the expansion of the FOS build on several initiatives that the Government have introduced, including the senior managers certification regime, which will hold key individuals at banks to account for the decisions that they make, including decisions that could impact on their SME customers. The industry has also made changes. For example, all major lenders are signatories of the standards of lending practice, ensuring that banks treat their customers in a fair and reasonable way. I hope that these steps, together with the work carried out this year to address historic SME disputes, will bring unresolved disputes to a close and prevent the same circumstances from occurring again.

I will conclude by saying that over the past year Sir Ross has taken considerable time to discuss sensitive and often distressing matters with customers; he has had 49 meetings with 62 customers, alongside his adopting a detailed and forensic approach to the cases he has reviewed, so I thank him for his efforts.

I welcome the commitment of Lloyds to implementing the recommendations of the Cranston review, and I will follow progress closely. I note the points made by the hon. Member for Glasgow Central (Alison Thewliss) and others, and I will reflect on them carefully.

The establishment of the Business Banking Resolution Service provides a further means of redress, and I look forward to seeing it bring closure to many long-running disputes. I am confident that we can continue to build on the good work that industry, small business representatives, regulators and Government have begun to rebuild trust, so that small businesses can access the finance they need to prosper and grow.