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Articles

Establishing the Business Banking Resolution Service

30 Mar 2021 | 2 minute read

Over two years of preparations culminated in the launch of the Business Banking Resolution Service ("BBRS" / "Scheme") on 15 February 2021. However, the roots of this new dispute resolution forum are deeper and go back to the fallout of the 2008 global financial crisis.

This short series will look in detail at the Scheme - set to be a "ground-breaking service for larger-sized SMEs with an unparalleled scope, mandate and level of expertise". First we consider the BBRS' formation and why it was established.

Why was the BBRS set up?

In March 2018, UK Finance launched a review into the complaints and Alternative Dispute Resolution ("ADR") landscape for the UK's Small and Medium Enterprise ("SME") market. Simon Walker was selected to chair an independent panel and the findings were published on 23 October 2018 (the "Walker Review").

The Walker Review's main focus was on SME customers that had made a complaint following the financial crisis of 2008 but might not have had access to an ADR process if they were unhappy with the complaint outcome. Walker identified three areas where action could be taken to improve outcomes for SMEs. Two of these were relevant to the BBRS:

The Walker Review recommended the establishment of a voluntary ombudsman scheme for larger businesses (who would be ineligible for the Financial Ombudsman Service ("FOS")) and a voluntary scheme to consider historic SME banking disputes.
The second was the need to rebuild relationships between banks and SME's. For this, the Walker review recommended a formal process with the support of major banks, to commit to a new system of dispute resolution to ensure past issues are not repeated.

UK Finance's response to the Walker Review (the "Response"), dated 1 December 2018 outlined a series of proposals made by seven UK banks (Barclays, CYBG, Danske Bank, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander) operating in the SME market to implement the recommendations in the Walker Review. The BBRS is the key output of the banks' Response.

How did we get here?

Although it was agreed that the BBRS would be funded by the banks that chose to participate in the Scheme. The banks that are currently signed up are Barclays, Virgin Money (including Yorkshire Bank and Clydesdale Bank PLC), Danske Bank, HSBC, Lloyds Banking Group, NatWest Group (including The Royal Bank of Scotland Plc, National Westminster Bank plc, Coutts & Company and Ulster Bank Limited (Northern Ireland)) and Santander.("Participating Banks") it was to be impartial and independently governed. Therefore, an independent dispute resolution service implementation steering group ("Steering Group") was formed in early 2019, to bring about the Scheme.

The Steering Group was chaired by Lewis Shand-Smith and included representatives for the Participating Banks, SMEs and the financial services industry. UK Finance's proposal for the establishment of a voluntary scheme to resolve complaints by larger businesses was welcomed by the Government, SME representatives and the wider industry, but there were competing views on how the Scheme should be delivered.

The following issues in particular were subject to much debate:

Style of the scheme

What factors were considered

The Government expressed its preference for an Ombudsman style, as it felt this could be established and resolve disputes more quickly and would allow complaints to be determined on a ‘fair and reasonable’ rather than a legal basis.

The APPG on Fair Business Banking(“APPG“) agreed that the Scheme should be determined on a fair and reasonable basis but felt that this should be within a voluntary independent arbitration mechanism, modelled on a tribunal. The APPG, (one of the spearheads for SMEs on the Steering Group) is a cross-party group of members of the House of Lords and House of Commons, which was set up in 2012 and deals with a wide range of issues between private businesses and their financial providers.

The solution

It was decided that the BBRS would be neither Ombudsman nor tribunal in style; rather it utilises a wide range of dispute resolution techniques included facilitating settlement negotiations; mediation; conciliation and adjudication. It determines complaints on a ‘fair and reasonable’ basis (we will be covering this in more detail in our next article).

Award Limit

What factors were considered

In the Response UK Finance proposed a binding award limit (“BAL“) of £600,000 for the prospective scheme and a BAL of £350,000 for the historical scheme.

The APPG felt that the binding award limit should be £600,000 for both schemes.

The Government’s expectation was that the banks default position would be payment of the amount awarded (even if this exceeded the BAL). This was welcomed by the APPG on behalf of SMEs.

The solution

BAL for the prospective scheme – £600,000
BAL for the historical scheme – £350,000

The BBRS can recommend an award above these limits and the bank is required to consider this reasonably and in good faith.

Ultimately the BBRS cannot require the banks to make payments in excess of the BAL.

Historical complaints that had already been subject to review

What factors were considered

There was a lot of debate about the extent to which complaints which had already been subject to some form of independent view should have access to the Scheme.

The APPG emphasised a need for an independent arbitration mechanism for SME’s, including those that have already gone through the Griggs and other ad-hoc reviews. It also felt that there should be an exceptions process for historic complaints which had already been subject to review, but where they had documentary evidence to support that that review was wrong.

SME Alliance agreed that the eligibility for the scheme needed to be broadened. SME Alliance (also part of the Steering Group) is a member-based organisation, made up predominantly of SME owners and set up in 2014 to support, share knowledge, network and lobby with and on behalf of SME owners who have fallen victim to banking financial and regulatory misconduct.

The Government felt it was right that the Scheme did not seek to re-open settled complaints, but it expected there to be further discussions regarding eligibility for the backward-looking scheme if it transpired that it was not going to bring about closure to past complaints.

The solution

It was decided that there would be a historic scheme for matters which took place between 1 December 2001 and 31 March 2019.

The historic scheme is due to run until 14 February 2023 and a previous review is not an automatic bar, but businesses will be unable to access the scheme if their complaint has been:

considered by one of these excluded schemes;
subject to litigation or settled; or
determined by, (or is eligible for determination by) the FOS.

There is also scope for the BBRS to look into concessionary cases (we will be covering this in more detail in our next article).

Conclusion

Our next article will look at accessing the BBRS and how it will deal with complaints; how the Scheme compares with other dispute resolution procedures; and when it is an appropriate forum for complaints.

For more information on the BBRS, dispute resolution or related issues, please get in touch.