Manchester law firm criticises SME banking system

An independent North West law firm has published a report that analyses the state of the UK’s current SME banking system.

Manchester-based Berg has said that small and medium-sized businesses are being manipulated by banks like Lloyds and RBS, which it considers to be using a mix of ‘consensual’ exits from their loans and selling off debts to eliminate risk from balance sheets, potentially destabilising small businesses.

The 2015 Banking Report, which is the second produced by the legal specialists, comes in the wake of the review by the Financial Conduct Authority into interest rate swap misselling.

Alison Loveday, a managing partner with Berg, said: “After last year’s report the main question we asked is ‘what has changed?’ Well, a lot has changed, especially with government plans to sell-off RBS shares and the end of the FCA review scheme.

“What is clear, however, is that the malpractice which was endemic in the SME lending sector is being re-packaged and given government approval.

She added: “This will lead to further cycles of litigation against banks, but only for those SMEs which can afford new prohibitive court fees. It seems that the banks and the FCA prefer these odds to truly dealing with the problems at hand.”

The report draws on the experience of businesses, academics and whistle-blowers, in addition to an analysis of the roles that accountants and independent reviewers play in SME banking.

This year, Berg’s report has looked at the practices of RBS’ Global Restructuring Group and the ways in which vulnerable SMEs are affected by debt sell-offs. Other highlights included the FCA’s stance on disciplining banks and a call to stop endless litigation cycles.

Speaking further about the report, Alison said: “We’re advocating a sensible and truly independent review orchestrated by the government and not a third party, and for an end to the spin and blame culture which will do more harm to both businesses and our banks unless transparency is restored to the sector.”