Nick Gould (Chairman of SME Alliance) talk at the FT Conference on Banking Standards- 27th April, 2017.
Good afternoon ladies and gentlemen.
I feel rather like Daniel in the lion's den standing here. My name is Nick Gould. I am corporate law partner at Gunnercooke. I am also Chairman and co-founder of SME Alliance and it is in that role I am speaking here today. SME Alliance is a sole purpose lobby group made up mostly of Small and Medium sized businesses who have in some way been damaged by certain action of certain people at certain banks. As well as trying to help members we act as a knowledge sharing group. I am here because bank customers who have lost out through poor governance, lack of regulation and lack of being "treated fairly" in the banking system need to be heard.
I have decided to divide this brief talk into three parts.
First, some examples from SME Alliance members of the effects of poor governance and rules which are too complex, unenforceable and unenforced.
Next, perhaps arrogantly, to give our insight into how some banks got themselves their current awful reputation.
Finally, I'd like to end on a positive note; what might be done to improve banks' culture - and why that would benefit all of us.
I should note that my comments are addressed mainly to two major UK banks and various regulators. The other financial institutions are not directly within these discussions-but you should be interested.
SME Alliance is, I think, wrongly perceived as a bank bashing organisation - we aren't, but look at it from where the owners of the SMEs we represent, sit. They feel beaten up, destroyed, not listened to and not heard, so they fight back. No one wants a war, but that's what it feels like and that is what we would like to try and get away from.
When I knew I was coming here I asked some SME Alliance members a couple of relevant questions. I will post the replies on an anonymised basis on our website www.smealliance.org but here are some of them. Although truth can hurt, I suggest we need to have a real dialogue and this could be part of it.
Ql. If you had a claim against a bank today would you be treated any differently?
Everyone said no-examples;
"No, I don't think I would be treated any differently. I think that my bank and its lawyers are arrogant and .believe they are invincible and they know that I have no money and can take no action against them."
"No because banks and bankers now think it's part of the game to extract every penny they can with no moral compass or a thought for right or wrong."
"No because bank culture has not changed."
"No difference now because the fundamental relationship between Banker and Customer and the insolvency industry has not changed one jot. Banks take security and it gives them total power -this is the problem."
Q2. Has there been any improvement in your treatment by your bank over last few years?
"Personally, worse; no interaction with the bank is possible. Imagine the school bully holding you at arm's length while he eats your sweets; but without the faint hope of a teacher coming to the rescue."
"I have seen no improvements since the recession. The Bankers maintain their arrogant standing! As they could not run a business how are they able to dictate to Small Businesses what they should or should not be doing!"
"Worse. There is no fairness being demonstrated in any dealings."
Q3. Would you say the people you have been dealing with have treated you with high ethical, professional and business standards; please provide examples.
"Recently one person has been really good professional polite and courteous although his hands are tied he cannot even sneeze in front of you without the approval of the legal team. In the early days it was all about intimidation and power to batter you down into submission you are made to feel alone and a failure."
"No definitely not! At Mediation they were intimidating to say the least. The bankers continue to lie through their Solicitors they have no morals or standards. They most of the time are trying to cover their backs for bad behaviour from the past."
Q4. If you could wave a magic wand and improve one thing in the overall conduct of your bank in its dealings with you, what would that one thing be?
"Truth honesty and decency along with large helping of self-reflection."
"Honesty, transparency and genuine file disclosures. The banks need to stop fabricating central files and file documents to cover up their misbehaviour and dishonesty, there will be a substantial cost to this but 'the rules are the rules'!"
And finally this is from Nigel Henderson. You might want to watch his talk at last year's Cambridge Symposium on Economic Crime, which you can find on YouTube.
"The mainstay of any business relationship is trust in the ethics, commercial morality and basic honesty of the people you are dealing with. Banks have shown themselves to be devoid of all of the above, putting personal and commercial avarice ahead of any other consideration towards their customers. Recent court cases have demonstrated that those at the very top of the banks persist in ignoring the conduct of the bank and covering up such wrongdoing."
So how did your industry get into this position? A couple of thoughts and several questions. It seems to most outsiders you are in a bunker mentality, you have your
Spades and you just keep on digging. For example, the have you ever thought how ridiculous it is that you need a regulation called "Treating Customers Fairly"? Why not just do it as a matter of course? Why find wriggle room to get out of such a basic idea? Where are the regulators needed to ensure rules are really enforceable and enforced? Would other regulators allow bullying of whistle-blowers, doctoring of transcripts between bank and customer, or a vendetta against certain customers? Does the Banking Standards Board ever talk to those affected by lax and lack of enforced standards? Why would a bank spend (say) double the amount on professional fees that it need spends to settle a claim? Why is there apparently such a fear factor within these banks? When a major bank sees itself as a co-victim, rather than a co conspirator, something isn't quite right.
And please take this next comment away with you.
Ethics, morals and relationships-they are, but shouldn't be, merely words to many. And because they are seen as merely words and because of actions or inaction, arrogance or inability to hear the real effects of those words, we know people who have committed suicide, have died, are dying of cancer, have had nervous breakdowns. These are real people with real lives-not numbers or units.
And you know what-- it is actually in your and everyone else's interest for you to behave morally and ethically, to build real relationships and to be effectively regulated. I never thought I would make this sort of comment and I assume no one wants to be spoken to like this. I also know very well, generalisations are odious. 99% plus of those working in banks are good and fair people.
So, where next?
This is from Nikki Turner, co-founder of SME Alliance, one of the few people I am in awe of and the person who with her husband Paul has spent over 13 years - THIRTEEN YEARS! - fighting for honesty, transparency and justice. You might know about the Turners, they discovered and took years to convince a world that wouldn’t listen that there was a fraud in HBOS Reading. And finally, the world (or some of it) did listen.
"Reality check - Most of all (and here's the 'world peace' line) I would like to see senior management having some real consideration for the society we all live in. Some senior bankers may believe the importance of the financial sector means they are indeed ‘masters of the universe' but that is ultimately a delusional view. I know many bankers who are good decent people but sadly, over the last ten years, the term banker has become synonymous with the most disparaging of descriptions previously reserved for unsavoury characters. It is a fact the only people not badly affected by the so called 'credit crunch' are the senior bankers who oversaw the disaster. Society has not forgotten this fact and it has tainted the entire sector. Given that nothing has changed for the better, society is becoming more and more frustrated by what can only be perceived as a culture of greed, arrogance and disdain for the very people who bailed banks out and allowed senior management to continue to receive telephone number sized bonuses. It is not a healthy or sustainable situation and the only people who can change this perception or this dark culture are senior bankers."
We need you to stop digging and to start acknowledging the real wrongs; start talking to us and others like us. Stop being just legalistic-be something more. Be human, be moral and recognise what happened to those on the other side of the table. If I worked in an industry and read some of these comments, I would be ashamed. Why not be part of a change for something positive. Paul Turner who knows more about these defects in banks than most, suggested something such as a truth and reconciliation commission, why not? I repeat, please come and talk to us with a genuinely open mind.