Presentation 29 th april 2013


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Presentation 29 th april 2013

  1. 1. 1
  2. 2. 2“The longest journey beginswith a single step.”Mao Zedong
  3. 3. 3The decision to sell to SMEs
  4. 4. IRSA Is complex financialproduct:• Original market• Part of a hedging strategy• Experienced buyers able to negotiateprice & terms4
  5. 5. 5“A conscious process of deceit.”
  6. 6. 6Did not market to SMEs whohad continuing financefacilities
  7. 7. 7A conscious process of deceit:• Identification of the SME owner• Asset rich• Borrowing requirement• Limited financial expertise
  8. 8. 8A conscious process of deceit:• Timing of approach• The perception of need• It is a requirement• Salesmen presented as advisors• Presented as “no cost” alternative
  9. 9. 9A conscious process of deceit:• Non-disclosure of Contingent Liabilitycalculation• Non-disclosure of CL’s impact onborrowing capability• Non-disclosure of bank’s profit
  10. 10. 10A conscious process of deceit:• Non-disclosure of incentivearrangements• Standard form documentationinconsistent with facts• Libor
  11. 11. 11IRSA’s are inappropriate forSMEs:• Longer than associated loan• Greater value than associated loan• Terms enabling bank to terminate• Exclude Margin• Risk of substantial cost of termination– SMEs require termination at modestcost
  12. 12. 12IRSA is inherentlyinappropriate for an SME
  13. 13. Our first achievement – toexplain the issue13
  14. 14. 14Our achievements:• Membership of Bully-Banks• Press / Media Coverage• Lobbying Campaign• Survey of membership
  15. 15. 15Our achievements:• Members contacting and meetingMPs• Submission of survey results to MPs• Alliance with MPs - Back BenchBusiness Debate in Parliament• The FSA Investigation
  16. 16. 16Bully-Banks’ 14 Point Plan:• Roll over of IRSA payments• Maintenance of banking facilities• Relief from VAT and NI payments• Definition of mis-selling• Timetable• Information from banks
  17. 17. 17A simple definition of mis-sale:• Over hedging – value and term• A requirement of loan• No information re break costs• Mis-description of Derivatives Expert• Unsuitable given educationalbackground or work history• Unsuitable given future plans
  18. 18. 1829thJune:FSA’s Agreement with theBanks
  19. 19. 19“Serious Failings in the sale ofIRSAs to small and medium sizedbusinesses and that this hasresulted in a severe impact on alarge number of thesebusinesses.”
  20. 20. 20Failings:• The bank’s decision whether therehas been a mis-sale• The bank to decide what constitutes“reasonable redress”• No clear process• No timescale provided• No urgent relief
  21. 21. 21BB’s Subsequent Actions:• Lobbying• Met with the FSA• Met with Ministers & ShadowMinisters• Met with the Treasury• Met with four banks• Conferences
  22. 22. 22• Until January 31stno evidence that theFSA Scheme will provide a solution• We are planning on the basis that thebanks will continue to beunresponsive and intransient• We continue to plan on the basis thatthe regulator will let us down again
  23. 23. 23Ordinary People inBusiness Limited
  24. 24. 24The Company’s objectives are:• to represent the interests of SMEs adversely affected bythe sale of financial products (including Interest RateSwap Agreements and other derivative instruments) tothem by their banks,– in their dealings with their banks following the sale of suchfinancial products,– in their dealings with government, financial regulators etc inconnection with the sale of financial products to them and theadverse consequences thereof.• to prompt a change in the culture and processes of:– banks in their treatment of small and medium sized businessesso that ordinary people in business are protected from the unfairactions of their banks, and– of the relevant financial regulators so that in the future theyvigorously and properly protect ordinary people in business
  25. 25. 25Our “Milk Stool” Strategy:• Legal Campaign• Parliamentary Campaign• Regulator and the Banks
  26. 26. 26Legal Campaign:• Signal determination to banks• Create pressure• Preserve rights• Best present the case
  27. 27. 27Members’ requirements:• Cannot fund solicitors’ and counsel’sfees• Cannot risk bank’s costs
  28. 28. 28Members MUST be legallyrepresented
  29. 29. 29Representation:• For FSA Scheme Review• For complaint to Ombudsman• For letter before action• For litigation
  30. 30. 30Parliamentary Campaign• MPs have delivered:–Media coverage–Pressure on regulator–Pressure on government• The APPG
  31. 31. 31Parliamentary Campaign• Strength: individual contact with MPs• Members must meet their MPs:–To explain the issue and it’sconsequences–To brief the MP by providing writtenevidence from Bully-Banks–To ask MPs to support the APPG
  32. 32. 32Parliamentary CampaignObjectives:• Monitor the regulator• Pressurise the banks to provideurgent relief• Pressurise the banks to provideredress• Prompt a change in the culture andprocesses of the banks
  33. 33. 33The Regulator and the Banks• We seek tripartite conversations:–Process of review–Mis-sale criteria–Principles of “fair & reasonableredress”
  34. 34. 3431stJanuary 2013:The FSA AnnouncementOf Pilot Study Findings
  35. 35. 35• Over 90% of Cases Mis-sold• Definition of “Sophisticated” changed• Criteria for “mis-sale”• Baseline for “redress”• Consequential Loss• Suspension of Payments
  36. 36. Last week first proposals madeby two banks to small numberof customers.Concerns:• Substitution of IRSA by another IRSA• Consequential loss• Continuing bank facilities36
  37. 37. 37Separate Categories ofMember:• Unsophisticated Borrower• Sophisticated Borrower• Embedded Swap / TBL• Those in administration / liquidation
  38. 38. 38Bully-Banks’ Role reFCA Redress Scheme:• Education / preparation• Communication• Monitoring:– Review Process– Banks’ Conduct– Regulator’s Performance• FCA & Ministers
  39. 39. 39Bully-Banks’ Role reSophisticated Borrowers:• Communication• Group Organisation• Sharing of information• Sharing of evidence• Use of Bully-Banks’ organisationalassets
  40. 40. 40Bully-Banks’ Role re EmbeddedSwaps / TBLs:• Clarity from Yorkshire & ClydesdaleBanks• Definition of the product and FSA’sability to review• Campaign for inclusion in FSAScheme
  41. 41. 41Bully-Banks’ Role re Borrowersin Administration / Liquidation:• Legal Research• Potential Funding
  42. 42. Banks’ reluctance to acceptresponsibility continues42
  43. 43. 43