Major Banks Plan to Close £50M Business Banking Resolution Service
The Business Banking Resolution Service (BBRS), a £50 million initiative aimed at resolving disputes between banks and small business customers, is on the verge of closure after operating for just three years. This decision comes as a result of its low usage and ineffectiveness, despite being supported by major banks including Barclays, HSBC, and Lloyds. Over the course of its existence, the BBRS has only managed to resolve 137 cases and distribute a mere £2 million in redress, significantly falling short of its initial aim to serve 60,000 customers.
Key Takeaways
- The BBRS, originally backed by large banks such as Barclays, HSBC, and Lloyds, received a total fund of £50 million to address issues between banks and small business customers, but it is now facing closure due to its limited impact, having resolved only 137 out of the expected 60,000 cases.
- Despite the substantial financial support, the BBRS has only managed to distribute £2 million in redress and has severely underperformed in fulfilling its purpose.
- Ongoing discussions are ongoing regarding the future of the service, with the participating banks likely to make a decision on its closure soon.
- The Treasury Select Committee has expressed the need for a new independent system to replace the BBRS, labeling it an "abject failure" during a parliamentary debate.
Analysis
The closure of the £50 million Business Banking Resolution Service (BBRS) underscores its failure to meet expectations and effectively serve the banking and small business community. The apparent lack of effectiveness, with only 137 cases resolved and £2 million in redress, may lead to reputational damage for the banks involved, potentially impacting their investor relations and customer trust. The call for a new independent system by the Treasury Select Committee reflects a growing need for more stringent regulations and oversight in the sector, as the BBRS's shortcomings serve as a cautionary tale for future collaborative initiatives in business banking resolution.
Did You Know?
- Business Banking Resolution Service (BBRS): The BBRS is a £50 million service established to resolve disputes between banks and small business customers in the UK, addressing issues identified during the Financial Conduct Authority's (FCA) review of the Royal Bank of Scotland's (RBS) Global Restructuring Group (GRG), which faced accusations of mistreating small business customers during the financial crisis.
- Redress: In this context, redress refers to the compensation or remedy provided to small business customers after their complaints have been upheld by the BBRS. Despite the high number of expected customers, the BBRS has only managed to distribute £2 million in redress.
- Treasury Select Committee: This parliamentary committee in the UK scrutinizes the work of the Treasury and its associated public bodies, including the FCA. Their call for a new independent system to replace the BBRS was prompted by a parliamentary debate that labeled it as an "abject failure."