SME Roundtable

JON McLEOD:  Good morning.  Welcome to this Business Banking Resolution Service round table.  I am Jon McLeod and I will be moderating this morning’s session.  In a moment I will ask our chair Lewis Shand Smith to say a few words of welcome, and after that we will be hearing from four independent experts with their views about the scheme.  We will then have a question and answer session with questions you have already submitted and questions you can submit live.  We have a panel ready for you to take your questions with Lewis, Samantha Barrass, BBRS chief executive, Alexandra Marks, the chief adjudicator of the BBRS, Lyndy Geddes, BBRS director of operations and Peter Taylor, BBRS director of legal and policy.

I am also delighted to say that we will be joined on that panel by Rachel Couter, who is a partner in the law firm Osborne Clarke, who has been advising the SME groups on the development of the BBRS scheme and I am hoping to able to bring her in to provide an independent SME perspective on some of the technical issues that we might delve into should that arise.

Just to be clear, we cannot answer on individual cases today, but we will address points on the basic principles of the scheme.  I hope that will be helpful for individual customers as they  reflect on their cases.  We will issue a transcript of today’s roundtable conversation, so you do not have to make frantic notes today: just sit back and enjoy the programme.  We will come back with a response to any questions that we are unable to answer during the session itself.  If you have submitted a question and you do not hear the question raised during this session, do not worry because we will compile a response to each of the questions submitted, in the way that we did after the webinar sessions that we held in the spring and early summer.

I am going to hand over to Lewis now to say a few words of welcome.  Lewis is joining us from stormy Shetland where snow is forecast later today, so I am hoping I can introduce Lewis from Shetland and invite him to greet you to today’s round table.

LEWIS SHAND SMITH:  Thank you, Jon, and good morning from what is indeed a wet and windy Shetland Islands.  We are looking forward to the snow that is coming later today.  Thank you for accepting our invitation to be here today.  It has taken us rather longer to go to a full go live with the BBRS than we originally envisaged.  There are two reasons for that.  The first one is Covid, and I am sure you will have guessed that.  The second one has been making sure that we get it right: getting all the legal documents right, getting the scheme rules right and so on.  The advice we were given by the SMEs all along is that it is much better to take your time and get it right than to rush it.  Thank you for that advice.  We are now very close to the point where we will go live.  We had a very successful live pilot however. Some of your cases may have been part of that.  The live pilot has certainly achieved its purpose.  Its main purpose was to test our policies and processes and that has been very successful indeed in doing that.

This morning we have four experts lined up to give their views of the service and what the service should be trying to achieve.  We are very grateful to you for being willing to do that.  This is an opportunity though for us to listen yet again.  We have been doing this all along.  We had virtual town hall sessions, where people were encouraged to participate, and did so, and that was incredibly useful.  Here we are again with the opportunity for you to speak, for us listen, for you to ask questions and us to try to answer them.  Thank you very much for that, and back to Jon to introduce our four speakers.

JON McLEOD:  Thanks very much, Lewis.  As Lewis says, we have four experts around our virtual table.  Each will present in turn for 15 minutes.  I may even try to slip in the odd question.  We need to keep to time because I want to allow plenty of time for customers’ questions at the end.  Experts, please do not be alarmed if I jump in to hurry you up because I want to leave plenty of time in the second session part of the session.

All the experts have been recommended by SMEs to us and they are independent of the BBRS.  It goes without saying they are reflecting their own views, and not ours.  As Lewis has said, this is a listening exercise and BBRS is interested in what they have to say.  As I have said before, we will be issuing a transcript of the day’s round table and we will be responding to any questions that we do not cover during the session.

After we have heard from the experts, we will go back to Lewis for an initial response to what they have said and to get a flavour of the take on the submissions that have been made.  Then we will go into our Q&A session.

Without further ado I would like to introduce our first expert presentation.  That is going to come from Adrian Maurice, who is chief executive officer of Pragmaticum Limited.  Adrian’s career began with PriceWaterhouse.  He then moved into claims advocacy, specialising in business interruption.  As well as dealing with individual cases, he has designed and run a number of major claims management projects.  Over the past seven years Adrian has brought together his experience of specialising in business interruption claims and operating one of the claim compensation schemes into representing the many SMEs that have been financially impacted by the high street banks mis-selling of interest rate hedging products.  As well as representing the claimants, Adrian is also advising All‑Party Parliamentary Group on Fair Banking and supporting it in getting a fairer system of resolving disputes with financial institutions.  It is a real pleasure to introduce Adrian this morning.  He is much talked about and hopefully Adrian and his presentation will appear at the same time.

ADRIAN MAURICE:  Thank you, Jon.  I am intrigued by being “much talked about”.  I hope that is a good thing.  Perhaps we could start by skipping through the next slide and moving on to the overview.  This is a quick snapshot.  I am hoping that by going through and talking a little bit about consequential loss, I can reflect back and see how that is likely to work within the BBRS.  It will be a snippet about how consequential loss works and how the BBRS should be preparing for it.

As Jon has said, I did have a life before bank mis-selling.  It was in assessing financial loss under a whole range of different compensatory environments. Through that we got to develop the ability to operate a claims system, particularly where you have many claimants, one compensator and one particular incident, oil pollution claims, where we dealt with Braer and Sea Princess and so forth.  Hopefully, that will give you some insight.

Just to emphasise this is not new for us.  We have done a lot of this before and hopefully that experience is something we can convey and assist the BBRS with.

What is consequential loss?  It is a financial loss that arises from an event.  That event has to give rise to a right or cause of action.  The person who is going to be paying you needs to be comfortable that what they are being asked to pay for is something that they have caused.  There is this concept of causation.  It has to be a direct link between what you are claiming for and the event itself.  That leads to logical assumptions such as it cannot be too remote.  Like the ripples of a stone in the pond, you cannot have something which is the consequence of something which is the consequence of something that you are then seeking to claim from.  There is no intervening cause.

A typical example of that is the economy.  If your business has gone down and is suffering, is it because of the thing or because the economy has gone down and it would have happened anyway?  That is the great contrast: would it have happened anyway or is it the thing that has caused it?  It must be foreseeable.  At the time the bank (in this case) caused a mis‑selling was it foreseeable that the cause of your loss would have occurred?  There is that concept of foreseeability.  And of course consequential loss must be the responsibility of someone else.  There are various different claim environments.  There is tort if there is another party that is directly responsible for it.  Equally, there are other schemes that have a slightly different take.  The Financial Ombudsman Service (FOS) has a concept of fairness, and that fairness can in certain circumstances override the legal framework.  There is of course legislation.  For example, if you get a burst water main in the high street which floods a number of shops, those shops have a right under the statute to be compensated.  Or a compulsory purchase order.  HS2 is a case in point.  And of course there are contracts.  Insurance claims is very much an example of that.  In fact, there is an appeal going on this very day for Covid PI extensions.  Good luck to those at the FCA acting for policyholders on that.

The main issue here is that it is an art as well as a science.  There is no right answer to consequential loss.  Unless you happen to have a Tardis and you can go back in time, we will never know what would have happened.  All we can do is put forward what is the most probable and best-supported answer.

Before we can get to quantification we have to deal with this issue of causation.  It is often the most omitted aspect of a claim or presentation.  This “but for” issue is something that needs to be addressed.  It has to be properly evidenced.  that can be done by looking at the financial consequences, in our case, of edging products or interest rates, contingent liabilities (which I know Abhishek will be talking about) and how that affected a bank’s perception of its risks and the consequences on the claimant’s situation.  Was your loan to value affected because of the contingent liability or more by the falling market that the financial crisis gave rise to, or a combination of both?  Were there some intangibles in terms of decisions that were made by you or the bank, or by others?  All this needs to be brought together to demonstrate that, in fact, the mis‑selling in this case gave rise to the loss that you are alleging.  It is not a question at this stage of proving the loss itself, but you have to give reasons for why the loss occurred and who was responsible.  No causation, no claim.

This is one of the areas in the past bank schemes where the banks have been able to kick out a claim on the basis of insufficient evidence.  That goes back to what is sufficient evidence?  It is a great area of ambiguity and there certainly needs to be a very clear articulation of how this should be in the BBRS.  People need to know how much they need to provide by way of evidence in order that their claim will be accepted.

Assessing the loss itself can be quite complicated, but the principles are relatively simple.  You have to establish what your loss of business actually is.  In doing so, you can strip out all the variable costs that have not been incurred when you quantify that loss.  That will be the variable costs.  Typically.  You look at your loss of sales, apply a rate of gross profit and that gives a gross profit, out of which all your overheads would have been paid.  If you have not paid those overheads, the compensator is entitled to a credit.  It is interesting that when I did the first claim in the FCA review scheme, the concept of savings had not even been thought about.  That was hurriedly put back into the scheme.  That is only fair and right and proper.  If you are being given the gross profit you have lost, you need to justify the overheads that would have been incurred.  In turn, if you incur additional costs to mitigate your loss, you should be able to get those back.  I am also advocating in any scheme any properly incurred professional costs should also be included, and of course there is compensatory interest we all know about.

Assessing a loss has to be fair and you have to prove the counterfactual, that is what would have happened.  You can do that in a whole range of different ways.

What do you need to do that?  I would say certainly somebody to help you put the claim together.  I see our role as being one of educating our clients as to how does consequential loss work, what have they actually lost, and to be able to look at how that loss is going to be articulated and the evidence required to support it.  There is a technical exercise to pull together the claim, pull together the evidence that supports it, both for causation and for the “but for” counterfactual situation, and then be able to put it forward and articulate it in a way that is easy for the BBRS, in this case, and the  banks to be able to understand what is being claimed, and why it is reasonable.  Again, this goes back to the threshold of proof and the concept of balance of probability, which has been lost in a lot of historic cases, where, for very obvious reasons, that threshold has been set very high.  It has never been fully articulated in the way the claims have been dealt with, and from the amount of compensation that has been paid out in consequential losses compared to direct loss, it is very clear that threshold was set at a ridiculously high level.  That is my opinion.  Nothing like as high as the bank have set it in their schemes.

My observations on the BBRS can by their very nature only be fairly general because we have not had published in any great detail the processes or the policies.  The first thing I would say is I know there have been no complex claims or consequential losses that have been piloted.  That gives me great concern.  Consequential losses are, by their very nature, complicated.  They require a lot of evidence and a lot of understanding.  If they have not been piloted, all those parties taking part in the process will not have experienced what is required.  The FCA interest rate hedging product review scheme did not pilot consequential loss and they paid a heavy price for that.  They were playing catch‑up for quite some period of time while they got those schemes and processes sorted out.  It is important there is full disclosure of the process so that everybody knows the rules that are being applied.

When you look at BBRS itself, the scheme has to be designed to fit what comes into it.  The eligibility criteria are still being finalised.  I believe other people will be talking to that, so I will not go into it.  Certainly if you are building a mode of transport it is useful to know whether it is a car, a boat or a plane.  In terms of the consequential loss, as I have said, there needs to be a lot of disclosure of evidence.  A lot of that evidence sits with the bank, and I would certainly be advocating that there should be disclosure at the start of the process.  The bank should open its books and give evidence to the other side.  This has advantages for both sides.  Certainly, I have advised many people who have contacted me over the last few years that they do not have a claim.   I have had reason to say that.  If the banks have evidence to justify their position, I would be more than happy to speak to the client to that case.  Conversely, they also have an awful lot of evidence that supports their case, but that remains buried.  For fair compensation to be assessed there needs to be full disclosure, and that needs to happen at the start of the process.

Lewis mentioned customer champions.  I think that is a very worthy idea, but I have a concern that there may be grounds for conflict.  Where a consumer champion is seeking to give guidance and support, at what point does that become advice?  At what point should they be giving advice, whether technical or process related, and if they do not give that, does that leave them open to criticism?  Certainly I have a vested interest in knowing whether the scheme is going to be advocating loss assessors or other claims advisers.  The RBS is their GRG compensation scheme paid for loss assessors to be brought in.  They saw the merits of that.  Somebody from RBS may be able to talk to that.  People I have discussed it with in senior positions at the bank said they found having people properly articulating the case and taking out the “lunatic fringe” was a very helpful thing for them.  It will also very much clarify the roles of the customer champions.  They do not have to worry about advising or trying to put a claim together for the people going through the process.  A very important part of looking at the scheme is who is going to put together the consequential loss claim.  If it is the claimant and it is their responsibility, which logically it should be, they need help to do that because it is not a simple thing.

If you have a scheme that is designed to deal with what may be complicated issues, I am talking about consequential loss – and we will certainly talk about the swaps and all these technical issues, which even now after a number of years make my head explode – there has to be a recognition that there needs to be training given to the case handlers so they are able to deal with the issues presented to them.  Having external experts is fine for an exceptional basis, but if they are going to be relied on for every case, it will become a log jam, and it will be very inefficient and very expensive.  That expertise needs to be imported into the process.  You need to have the claims handlers qualified to do that ‑ loss adjusters and people like that who have experience in handling consequential loss claims and business interruption claims for SMEs.  That piloting needs to happen for consequential loss, otherwise log jams and other issues will present further on.  The rules and policies must be clearly understood.  That is one thing the bank schemes failed dismally to do.  We were trying to decide whether we were playing a ball game that was either cricket or rugby.  It is always quite difficult.

There has never been a greater need for BBRS.  The past bank schemes are all discredited.  They are flawed.  I will not go into my view on them as it will take another two or three days.  I believe that with FOS having an uncertain history, and interesting times coming ahead with all the Covid cases that are now stacking up on them, there is a great need for BBRS.  I am personally wedded to help in whatever way I can because there is this need to have a truly independent arbitrator for the losses that people will inevitably suffer.

JON McLEOD:  Adrian, thank you for that very lucid and crisp presentation.  I will come back with one quick question.  It struck me while you were presenting that one of the arguments you are making is that an expert input in relation to consequential loss could lead a case to earlier settlement and could play a constructive role in resolution.  What is your perspective about where professional opinion on consequential loss is fed into a process which really is driven by alternative dispute resolution, which is our guiding principle?  I would be interested very briefly to get your views on that.

ADRIAN MAURICE:  I think ADR is a very worthy principle and I think it has its place.  BBRS is interesting in that it has two faces.  It has the backward looking dealing with historic cases which are fixed and, in many cases very old.  In such situations, I think the parties are by their very nature quite stuck in their positions.  The opportunity for ADR will only arise once the losses have been properly teased out and assessed.  Then it will be a question of settlement.  I do not think there will be much opportunity for early settlement, but there is an opportunity for efficient settlement.  If the claims are well articulated, it makes it a lot easier.  Can I give one quick example?  I had a lady who came to me with a bank case for a claim of £2 million or £3 million because she felt she had lost the opportunity for developing two barns and a development site she had on her property.  She claimed for the loss of those two barns and development.  I had a look at it and I said, “You’ve still got the barns, haven’t you?” and she said, “Yes” “And you still own the property on which you are proposing to develop the site?” and she said “Yes.” so I said, “Your claim is not for the loss of it because you still have it.”  Your claim is for the delay in the development of it.  The claim ended up being a matter of £200,000 or £300,000.  It still got thrown out of course, but a proper articulation of the loss makes it much easier to settle.  Going forward with the forward looking part of BBRS, which is a more dynamic thing, certainly I would hope there would be a situation where if there has been a complaint lodged that can be looked at very closely.  Like in an insurance claim where you have a fire you have not lost anything until it manifests itself.  With BBRS if they can resolve a complaint early and prevent the consequential loss occurring that must be a good thing.  That ADR aspect going forward is a very much more useful concept to be looked at a lot more.  I hope that has answered your question.

JON McLEOD:  That is very helpful indeed, Adrian, and a very interesting reflection.  Thank you to you for your participation this morning.  Trying to keep to time I am going to move swiftly to introduce our next expert who is Ian Lightbody.  Ian is a chartered builder.  He lives on the South side of Glasgow with his wife Louise and three daughters.  He is a past president of the Scottish Master Builders Association.  He served a double term in 2001 and 2002.  He is a keen sports follower and also is the past president of a local Burns Club, which celebrates the life and works of Robert Burns but also undertake charitable activities for the benefit of school children in the east end of Glasgow.  Ian is currently Chairman of the Virgin Money Mediation Support Group leadership team and he is in the management team of the SME Alliance.  Ian in his profile describes himself as determined not only to achieve justice for him and his family but also for many others who have encountered difficulties with their banking relationships in the UK.  Ian is going to talk on the theme of access to justice and give an overview of his perspective on that.  It is a pleasure to introduce Ian now, so over to you Ian.

IAN LIGHTBODY:  Good morning.  The first slide is headed “Access to Justice”, as are all 14 slides that you will see this morning.  There are some bullet points on the first slide which basically have been abstracted from the notes for guidance that we were given for this particular presentation.  These are not exhaustive, but they really are the ones that I think, arise, that are worthy of note.  It is about the design of the BBRS and what, basically, is eligible.  The one at the bottom I would say the  striking one, where it communicates that insolvent (or dissolved) companies will be eligible.  That until now that has been a bit of a grey area and a problem.  For those of you who fit into that category, I think that is a great bit of comfort.   It should be communicated as soon as possible what is and what isn’t eligible, and eligibility is obviously going to be the big area to be overcome in the coming weeks and months.

Can I just say that I am not purporting to be an expert this morning, although some people have said in the past that I know more about this bank,  the bank that I am involved with, than the chairman did. I actually articulated that to him recently.

Having said that, we have a ‘no one solution fits all’ within our group. Some people have gone down the legal route.  Some people have gone to the FOS.  As Adrian has said, the least said about that, the better.  Here we are with BBRS.  We wrote out to members in May this year suggesting they should sign up.  Some have dropped off and some of my leadership group, to be honest with you, have, basically, gone down another route, thinking that the BBRS has not achieved what it was set out to do.  We are still here, and we are still talking to you.  That is basically my reading of it.

The second slide is in relation to, basically, Justice Denied.  The analogy here is that the post box you will see here relates to the ongoings at the Post Office recently. You’re probably a bit like me and you will have seen just exactly went on.  Some people have been through the courts even and the justice system has not picked up all that was wrong with these prosecutions.  They fought for justice and they are now getting it.  In the same vein we are doing the same.  So, I had other analogies I wanted to use, and I was asked not to use them.  They are probably a bit too emotive.  I will reference that they were the Hillsborough disaster and also the Stephen Lawrence, case where the families have fought long and hard for justice.  These instances happened round about 1990.  We, like these people, will not give up.  The banks and whoever else is here representing the banks today needs to understand that we will not give up.  This really needs to get sorted.  Very much in the same vein of slide 1, this really is the ‘last chance saloon’, as far as I can see it.

Can we carry on with the next slide please? Slide 3  This should not be forgotten this is basically the reason that the whole system, the whole set-up was arrived at in the first place.  The victims on this call today and the victim support teams have to be commended.  You are the lucky ones. Some have not survived the process. The APPG for Fair Business Banking and Kevin Hollinrake – the work they have done has been invaluable. They are taking a lot of flak at the moment around the bazaars, but I don’t share those sentiments, I think what they’ve done has been invaluable.  I personally have witnessed parliamentary debates.   I think there were seven in Parliament and Westminster Hall over 18 months.  Which, basically were under inspiring at the end but very inspiring during the course of the debates.  The under inspiring aspect is the Treasury and particularly one individual who basically let down the mood and the essence of the meetings every time.  So, we have had all these parliamentary debates.  We have cross-party support which is unprecedented.  We even had Urgent Questions in Parliament, but still we have not got justice.  Here today is testament to the strength and resolve of the victims who have been badly treated.

At this point the presentation / IT failed. Presentations by Cat McLean & Abhishek Sachdev progressed, and Ian Lightbody returned later to complete his presentation.

Ian was informed that the previous presentation, before the break in the line concluded at P4, the Walker Report.

I am going to push on. I understand from messages coming in that slide 4, the Walker Report one, which is on the screen just now, was the last slide I got to.  I do believe that it was beneficial actually to hear Cat McLean and obviously Abhishek because they tie in very well to this report, this presentation.  I will go back to what I said earlier this report was completed in 2018 and it is nearly 2021.  This report was to bring fair resolution where no lawyers were to be involved. What Cat confirmed was natural justice through mediation.  We have not seen anything like this – the banks have not been akin to this for instance Andrew Bailey said recently that they have “lawyered up” and that is where we find ourselves just now.

I will move forward now to the slide (9 of 14) the one that you have suggested I move to, the one which is on the screen, on the eligibility criteria.  This is the proposal that was put, as far as I am led to believe that was put by the SME representatives to the ISG and BBRS in June of this year.  It was endorsed by all the SME representatives on the ISG and, as far as I am led to believe, it was rejected without reason and without substance by all the banks’ representatives.

That leads me to the question – everybody will hopefully get a copy of this I hope and it should be on the website – and it suggests that all claims should go into the BBRS and be assessed on their merits.  The question is to the ISG to reconsider ahead of the meeting next week to make the scheme live.

Can we go to the next slide (Slide 10). Hopefully you’ll have the correct one in front of you.   Basically, specific evidence or personal evidence that is not necessarily new evidence.  It’s evidence that has not always been available.  There have been years of denial.  This particular issue affects thousands involving “Hidden Margins” and “Contingent Liabilities” which are widely and rightfully being referenced at the moment.  Following years of denial banks now, and specifically, the Clydesdale (Virgin Money) but in writing to the Financial Ombudsman in 2019, it took years, “The bank has acknowledged that as part of the overall customer rate the Bank’s Treasury Solutions teams usually added circa 50 basis points to achieve the fixed rate for borrowers.”

So, as Abhishek said, we were never given references to spot rates. It was always LIBOR.  They added these base points, which were not on the margin side of the equation, it was actually put in, as a covert addition, on the rate which was meant to be a market rate on the day. So, there are thousands of cases here relating to this particular bank alone but obviously thousands and tens of thousands of cases in relation to other banks where the cases have not been resolved.

That takes me obviously to the Business Banking Resolution Scheme.  What we are seeing here with this information to hand, after years of denial these cases should be allowed to go through.  I have got a picture.  For instance, in the Clydesdale case they had 2286 complex cases reported to the independent scheme and of those 1,500 actually got reviews.  Even with that 700 or 800 cases natural justice has not prevailed and they should be given access to BBRS to get this done.

Interestingly enough and touching on what Abhishek said, some of us were given assurances in writing we were getting an IRHP.  As unsophisticated customers, we basically were none the wiser and we basically took them on their word.  Now we are being told that these ones were unregulated and there was no IRHP associated to these loans; so therefore they did not fit into the review that was done by the banks.

So if you can please go to the next slide (Slide 12)? I’m not getting the slides on the screen; I really do apologise.  The bank centric independent review schemes overseen by seemingly Independent Reviewers- earlier it was stated that consequential losses were welcomed in all cases.  The information we have received from our members is that is not the case.  The head of remediation writes out to one of our members and says we have done a review of your case and there is redress for direct losses that we are going to pay but there are no consequential losses. This is ridiculous behaviour from a bank which at this stage, should not be prejudging the potential consequential  losses and, contrary to the hard-line approach that they were taking, should have been offering support to a business that has a valuable property portfolio and relies on the bank, despite the review.  The position that the customer finds themselves in – it is ‘Hobson’s Choice’.  If anyone here today including the representatives of banks believe that these schemes were truly independent, as my 90-year-old mother says, if somebody is scheming something, they are basically worth watching.

Coming to the penultimate slide, which is the one with Andrew Bailey’s picture on it, basically Andrew Bailey is a big advocate of the BBRS.  We pressured him to do an independent review for Clydesdale cases, a judge led review similar to the Cranston Review of the Lloyds cases, but he was adamant the BBRS was the place to put these reviews and these schemes.  We’re taking him on his word and again he has to be called to account on this with others.  He has now immense power at his fingertips and he has said, and again it is on the screen, “… the TBL scheme” – which relates to Clydesdale – “was not in my view a qualifying independent scheme.  As you know this is relevant to the BBRS eligibility criteria.”  Further down in relation to his comments at the FCA annual public meeting last year, when he was still there, he says “My view, I have said it before, but I am happy to say it again, yours is a case that should go there.”  That relates to John Guidi, the hunger striker’s case.  So I don’t know, is there is a bigger authority in the UK on banking than the current Governor of the Bank of England and the immediate past CEO of the FCA, and if there is, let me know who it is and we will go and chap on their door?

So if we can please go to the last slide, thank you for your forbearance, it hasn’t been any easy experience, certainly for me, I’m basically going to remain with the greatest authority in banking, in my view, in the country certainly by appointment.  Andrew Bailey, in an email just shortly before he entered the job at the Bank of England said, “You may therefore wish to point out to the banks that we are in a different world now” ‑ I do not think anybody can argue with that – “and they should take the necessary action to sort out these remaining issues quickly”.  So again, it is absolutely clear and unequivocal that the Governor of the Bank of England wants this sorted.  I will put it to you the banks’ representatives here today that this is the ‘last chance saloon’ to get it sorted otherwise who knows what will happen?  That concludes my presentation.  I would like to thank all the IT people and BBRS people for getting it done.

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JON McLEOD: I am really pleased to say that our next expert is Abhishek Sachdev.  He is the chief executive officer of Vedanta Hedging Limited.  He founded the company in 2011 to provide transparency for corporates that used derivative products in order to hedge their risk.  Abhishek graduated with highest award of a first class honours in economics from Durham University.  He spent time working in the Treasury and then was recruited by Lloyds TSB as a future executive leader.  Since then Abhishek has acted an an expert witness in several high court cases involving derivatives and is regularly instructed by leading QCs and solicitors in the UK.  Notably Abhishek was the only derivatives expert called on by the UK Government to provide expert evidence to the Parliamentary Banking Commission on Banking Standards in September 2012.  This was a panel comprising members of the Government’s Treasury Select Committee, members of the House of Commons and Members of the House of Lords.  He also provided advice to the then Financial Services Authority, to the Treasury and to the Government Insolvency Service.  It is really good to have Abhishek’s expert input today.  I am going to hand over to an Abhishek now to make his presentation.

ABHISHEK SACHDEV:  Thank you for that very kind introduction.  I want to think about, in particular reflecting on what Adrian said earlier about consequential losses.  Even though I have a fair few slides, I want to spend pretty much all of my time talking about one really key aspect which unfortunately is not well understood by even solicitors, barristers, and even sometimes experts who claim to be working in this area.  It is a really fundamental area, in particular for SMEs.

Contingent liability/credit limits.  I am going to try to explain this.  I have tried to explain this hundreds of times but it is really important for me that people understand what this means for SMEs.  When somebody goes to a bank to borrow money, the bank will want to take security typically in the form of a property.  If somebody has worth £1 million, the bank might say, “Here’s £700,000 on a 70% loan‑to‑value basis.  Very simple.  Why does the bank need that security?  Because if something happens to that small business they have something they can sell to recover the amount of loan they lent.  That is fine.  We all understand that.  Banking 101.  What if that business is sold an interest rate swap or an interest rate hedging product (IRHP)?  The interesting thing as now of course a lot of people have come to understand, these derivatives can change in value every second of every working day, and nobody can predict where these movements are ever going to go in the future.  I spent some time working at HM Treasury and I worked with some of the smartest economists in the country.  I quickly realised that most economists are useless at being able to forecast anything going forward.  They are really good at telling you what happened in the past and why it happened.  The bank does not know what is going to happen in five or 10 minutes let alone in 20 or 30 years in some cases.  What does the bank do?  The bank cannot just put its head in its hands and say, “We don’t know what’s going to happen so we will sit here and wait,” because if a swap is provided to that business and interest rates fall, and there are substantial breakage costs and something happens to the business, they are potentially going to be on the hook for the loan which has been given to the business as well as some substantial breakage costs.  If there is not enough security there the bank has a big problem.

What does the bank do in this tricky situation?  The bank has these fairly clever or at least they were thought to be clever simulated black box models.  They are called Monte Carlo stochastic simulations but that is a little too heavy for a Wednesday morning.  Just think of it as a big black box computer model and in that there are lots of different variables and software and bit and pieces.  They analyse what interest rates have done over the last 20 or 30 years.  Obviously, this is pre‑financial crisis.  The bank estimates in a worst‑case scenario how bad this breakage could cost get.  They estimate to a 95% confidence interval or, in simple terms, in 19 out of 20 occasions how bad do we think the breakage costs could get.  That computer model spits out a number.  It is not the relationship manager who works that out.  It is the hedging or treasury part of the bank, the derivatives team.  They give that number to the relationship manager.

Different banks call that number different things.  RBS calls is CLU ‑ credit limit utilisation. Barclays calls it CEE ‑ credit equivalent exposure.  Lloyds sometimes calls it PFE ‑ potential future exposure.  There are lots of confusing different terms for this.  It can be called credit limits or contingent liabilities.  Let’s say that number is £200,000 in that example I gave earlier when somebody is borrowing £700,000 from the bank on a £1 million property.  That number is given to the relationship manager and he has to go up to credit, the same people he went to get the loan and overdraft approved and say, “Please can I have authority to assign a hard credit limit” – and I will explain what that means in a second – “of £200,000 for this customer?”  All being well, the bank credit team will say that is fine.  The bank relationship manager has to approve in writing, fax or hard copy or whatever it may be, to the treasury guys, “We underwrite £200,000.”  That £200,000 is then added to the customer’s credit risk profile.  This is one of the big problems with the way some of the banks have been dealing with this in recent years.  The banks will say, “Yes, we did calculate these credit limits, but it is nothing to do with the customer.  It is sitting on our balance sheet.  It is an external number.  With the greatest of respect, having worked in banks, and all of our teams have worked in banks, it is only internal because the banks choose to make it internal.  If you do not disclose something to someone, that is internal.  But it is not sitting on RBS or Lloyds’ balance sheet.  That credit risk number is sitting on the customer’s credit risk assessment.

When the bank looks at that customer’s risk profile, they see a loan of £700,000, maybe a bit of overdraft and some credit cards, but they also seen a £200,000 credit risk limit.  They see a total risk exposure of £900,000 versus a property value of £1 million.  That was probably okay in 2006.  Then what happened is we had the black swan event, we had the financial crisis and interest rates fell to half a per cent.  What happened in that 1 in 20 scenario is it blew up the models.  In this simple example, say the breakage cost rose to £400,000 and yet the worst the bank had expected was £200,000, what position is the customer and the bank in?  The customer still has a £700, 0000 loan.  Let’s assume he has not paid any capital back.  He now has a breakage cost of £400,000 and the bank has a total exposure of £1.1 million but the bank only has security of £1 million.  The bank is getting flashing red warning excess lines every day sent to it from its internal teams saying you have only got security of £1 million but you have an exposure of 1.1.  The bank cannot just phone up the customer and say, “By the way, you are suddenly breaching covenants,” because the customer will say, “Hold on a second, you never told me about this contingent liability exposure when I went into it so what do we do about that now?”  The bank does not have that conversation.
unfortunately, the bank has to do something.

That is why the bank is under increasing pressure at that time or maybe put it into a BSU or GRG unit to try to remedy the situation.  This is a really significant impact and it links to what Adrian was talking about earlier.  I have had not hundreds but thousands of SMEs say to me that in 2009, 2010, 2011, they were speaking from one bank to another asking for help to refinance their portfolios, and those discussions were going really well.  But as soon as the customer said, “By the way, I have got an existing derivative,” literally the phone was hung up on them.  This happened in 99.9% of cases I have spoken to.  That happened because the new bank understands it has to absorb this contingent liability on to the customer’s credit risk profile and it costs the bank real money in capital and it has BASEL II implications, et cetera.  We do not need to go into all that today.  But this really does matter for SMEs.

Why am I talking about this to the BBRS?  It matters because these numbers were often not disclosed to customers as part of their IRHP review process.  The FCA paid me to advise them on how to set this up but when I started telling them too much about this, they stopped listening to me.  And that is fine.  These numbers were not disclosed to the SMEs.  Sometimes these SMEs only found out through taking legal action or through subject access requests, et cetera, about what the credit limits were and the impact it had on their borrowing profile.  This was concealed from them at the time they went into the derivative and of course concealed from them throughout the life of the derivative.  They have this new information and I would argue this is new fresh information they did not know at the time, and therefore, it can make a material difference to their overall complaint to the bank, perhaps in them challenging should I have been given a ten-year swap for a five year swap instead.  It also makes a difference in the consequential losses, which someone like Adrian and other credible forensic accountants can calculate.  It can mean fresh new information for a new complaint which, God willing, can be looked at by someone like the BBRS.

If we go to the next slide I have a brief illustration of what that looks like.  The bottom line shows the market to market, for example.  This is from a live customer we worked on and it shows the market to market reached as high as £980,000 in 2011.  The customer may know that because when they ask the bank, “How much is it going to cost to me to get out of this?” they will be told 980K and the customer falls off the chair.  What the customer does not know is the actual amount of exposure the bank sees the customer as having is more than double that.  It is £2 million.  The customer thinks, “Woe is me, I owe 980 K here, how am I going to find that?” but the bank sees it as £2 million.  Everything the bank says and does to the customer is clouded by that £2 million exposure and not the 980 K.  This is where it makes a big difference.  Like I said, unfortunately this is not well understood by almost everybody that I come across.  I am happy to take any questions on this later on.

I will quickly run through a few other issues.  This topic comes up.  There is a big misnomer and there is a real big challenge they have with the peer review scheme about complexity of products.  The review scheme said complex structured collars are bad and simple vanilla swaps are good and vanilla collars are bad.  Those terms are completely wrong and misunderstood, in my view, because it does not make a difference whether you have a ten‑year structured collar or a ten‑year interest rate, which is a vanilla one, the contingent liability and breakage costs for both those products are almost identical.  That is what matters to an SME rather than the label of the product they have.  Obviously, an interest rate cap does not have any of these contingent liabilities because there are no potential breakage costs that one can get with an interest rate cap.

There is a quick issue that is relevant for both historical cases Ian was talking about.  He was talking about the breakage costs of hidden or embedded or derivative loans, which the Clydesdale did a lot of, but it is not just Clydesdale and Yorkshire. There were building societies helping clients challenge these things too.  This is something live and current and again interesting for the BBRS because these fixed rate loans are still being sold even today.  What is happening here is the FCA and Treasury and everybody simply says there is a lacuna in the law here and these are not derivatives.  They may look and feel like one but are not one.  I will leave those arguments to those kinds of people.  Fundamentally, these products are still being sold today.  There is nothing wrong with that.  They are providing protection and why should an SME not be given protection against rising interest rates.  But they are not being sold in my opinion in a fully transparent MiFID-regulated FCA‑compliant manner, because the banks are simply saying there is no derivative here.

If we look at the next slide this shows you one major clearing rate which provides a lots of fixed rate loans to SMEs.  To be fair, they are trying to do the best they can by explaining the different scenarios and breakage costs that can happen today.

These two slides are part of a 25‑page slide presentation that is given to an SME who is borrowing a £1.5 million fixed rate loan.  These presentations are very difficult to read and understand.  I even have accountants and solicitors saying to me we do not understand these things, and yet the bank still says this is not a regulated product.  We provided some training on this for the Financial Ombudsman Service.  We are happy to help both the BBRS, and of course SMEs, understand that yes these are not derivatives but let’s not worry about the label issue per se.  Fundamentally, these can still have the same issues as swaps in the past.  In some cases they can still have contingent liabilities.  Breakage costs can still be substantial.  These things are not easy to understand and explain.   Fair credit to this bank for trying its best to explain this, but a 25‑page presentation is still far too difficult for an SME to understand.

The same point happens today when one is entering into a fixed rate loan or swap.  You need pricing software to be able to understand what the live right is.  Unlike a loan margin, where you can just go online and ask how much a business loan is from Lloyd’s or NatWest, or you can go to a broker, with derivatives the price of these are changing every second of every working day.  You cannot see these online anywhere.  You need access to someone.  I am not saying it has to be us but we are the largest regulated company in the country doing this for SMEs, so feel free to come to us.  Go to someone who has access to this so when you are entering into the fixed rate loan or swap with the bank you get access to that live pricing software.  Without that, and this happened a lot in the past, you are beholden to whatever price or rate the bank says on the phone.

What can sometimes happen on something like this is the bank says to the customer the rate you are going into this fixed rate loan is 1.5% but what does that 1.5% mean?  There is the wholesale cost of the swap rate, which the bank might say is 1.2 but we can look it up and say, “Hold on a second, it is 1.05,” and we can negotiate that down.  The bank says they are adding on a margin to that.  That is fine and they should do that because why should a bank provide anything for free?  A bank might try and add on 30 basis points and we might say, “Hold on, we did something with Barclays or Lloyds or NatWest last week and it should be 20 basis points.  The end point is the customers gets a rate of 1.25 as opposed to 1.5.  That has a material impact on them.  Even on a £5 million loan for five years that can mean £50,000 or £60,000 saved.  Again if you do not have access to information like this, there is a chance the bank may try to take advantage of the customer even by a couple of basis points here and there that can really make a difference.

The same sort of thing happens with a cap.  I will not go through this now, but I am happy to explain this to anyone online.

The next slide and I think we are done.  Apologies if I spoke quite quickly there, but there is a lot I wanted to get through.  I hope I have tried to explain it in relatively simple terms to everybody, but I am happy to have any questions when it is appropriate to take them, from the BBRS or any SMEs.

JON McLEOD:  Abhishek, thank you so much for making a lucid presentation about what is a very complicated subject.  If I am reading correctly the burden of your song is that the quality of the information provided to the customer at the outset is absolutely critical to securing that customer’ understanding and without that understanding there is inevitably going to be a question mark over the capacity for the customer properly to enter into a loan agreement, that message is well represented by you.  I would like to cross‑examine you on it, but we are tight for time.  I am very grateful to you for that.

I want next to introduce Cat MacLean.  She is a partner and head of dispute resolution at MBM Commercial, a commercial law firm.  She is based in their Edinburgh office.  She specialises in financial claims against banks and other financial institutions and professional negligence claims.  She is a member of the Professional Negligence Lawyers Association and the sole Scottish representative of the International Financial Litigation Network, an association of law firms across Europe who are willing to handle complex claims against the banks.  As well as being a highly qualified and experienced lawyer, she is a qualified mediator as well, which certainly chimes with the BBRS’s emphasis on alternative dispute resolution.  Cat is going to present today in the form of a question and answer session which hopefully is a bit more interactive and more discursive.  Thank you for joining us this morning.  Maybe you could start by telling us a little bit about your experience and background and how this led to you having an interest in SMEs and banking disputes?  How did this all begin?

CAT MacLEAN:  Originally I was an advocate, which is the Scottish equivalent of a barrister.  I did that for ten years.  I did a bit of commercial work but very largely I was a personal injury lawyer.  I decided I wanted to move on from personal injury and do more general commercial litigation work and moved to MBM Commercial.  Within weeks of my arriving at MBM commercial somebody chapped the door, as we say in Scotland, and said, “I need help and my existing solicitor cannot help because they are conflicted, they are on a bank panel.  It was one Derek Carlyle who will be very well known to most of the people on the call around the table.  Derek Carlyle came to us because his solicitors were conflicted.  They were on a bank panel.  Very fortunately for him we were a small firm and we had deliberated decided we were not going after bank work because for economic reasons it did not make sense to us.  We were not on a bank panel, and so we were not conflicted and we were able to take on his case.  We did that in 2008.  Quite unusually in his case the bank had very specifically raised proceedings against him pretty much immediately in August 2008, so his case was litigated right from the off.  We acted for him for eight and a half years.  As people will probably know, we won at first instance establishing that there had been a contractual promise made to him which the bank had breached.  The bank took it to appeal.  We lost on appeal.  We took it to the Supreme Court.  The Supreme Court upheld the original decision at first instance.  We were sent back to the beginning, to first instance, to thrash out issues such as causation and quantum.  It was a very long, slow, steep learning curve.  That is really where our expertise and specialisation in financial disputes was born.  After the first instance decision there was a fair amount of publicity.  It was a slightly ground-breaking decision.  It is one that we certainly have relied on many times since, particularly the Supreme Court decision.  I know that other claimants have as well because it establishes where a bank makes a promise it must held to that promise even if the promise was not ratified in a formal loan document.

I would love to say we saw all this coming and we saw the crash coming and we knew that was an area we wanted to get into but it was slightly more serendipitous than that.  I am very glad that we did.  It is tough sometimes and it is obviously incredibly tough for claimants.  But it can be really tough for solicitors as well because to do a good job you have to stand shoulder to shoulder with your clients and you have to take on some of that stress and anxiety.  Your job is to try to defray that as much as possible, to do a good job for them but to protect them where you can.  I am glad I did it.  It is not always straightforward and sometimes some of the inequities and unfairnesss are challenging.

JON McLEOD:  Thank you for that.  Of course the BBRS marks a shift away from litigation.  You have described litigation taking a very great number of years.  You have observed the establishment of the BBRS from a distance as an independent solicitor.  What the kind of issues and challenges might be on the road ahead to get the BBRS up and running smoothly in its early months of operation? What are the sorts of things that SMEs, and indeed the BBRS itself should be looking out for?

CAT MacLEAN:  To start with the beginning of what you said, that distinction between litigation and alternative dispute resolution is important, because yes, I am a litigator, and that is what I am trained to do, but I am also a qualified mediator, and that is what I am trained to do too.  It is axiomatic for any of my clients a mediated or negotiated resolution is always going to be better than a litigated one.  Yes, Derek Carlyle won but it took him eight and a half incredibly punishing years to get to that point of having a Supreme Court judgment in his favour.  It would have been very much better for everybody, and probably the bank too, if we had been able to negotiate and/or mediate that much earlier in the process.  Wherever possible, we try to get our clients to mediation and we try to push banks really hard to mediate.  A lot of the time it has been possible, but I will say that very often the banks will hold out and hold out and hold out knowing they have far greater fire power, waiting to see if the claimant is going to run out of fire power themselves.  Only at the point at which they feel that the claimant is not going to give up and go away will they agree to mediate.  That is something that needs to be resolved.  I think there needs to be a greater balance.  There needs to be greater accessibility not just to negotiation but mediation as well.

In terms of the challenges of getting the scheme up and running and working effectively, confidence in the scheme is absolutely key.  I think there is a real need – and  Ian touched on this a little bit from the part of the talk we were able to hear – to instil confidence.  That, in my view, has to be done by clearly differentiating this from any of the other schemes that have gone before.  Possibly Adrian and/or Abhishek made the point that past schemes – the IRHP scheme, the GRG scheme – have all been discounted and discredited.  We know there is no trust and confidence in those schemes.  There was a great deal of hope at the start of the IRHP scheme, for example, and many people were very disappointed.  There has to be clear differentiation.  How is that going be to done?  Information sharing is key and other speakers have talked about the importance of disclosure.  I think that is vitally important because what has happened in the past is that banks have been able to hold on to and retain information that plainly pertains to the client or customer, particularly where it is an SME.  They have used data protection rules to say they do not have to release information that pertains to the partnership or the limited company only in relation to the individuals.  That has to be remedied.  There has to be proper disclosure and there has to be a mechanism by which the banks are made to disclose relevant information.  There has to be openness and contactability.  For example, in the IRHP schemes and other schemes it has still been relatively one way.  Yes, you can apply to a participating in scheme and give them all the information you like, but the extent to which you can be communicated with is very limited, and that is very frustrating.  Adrian talked about the areas of ambiguity that the banks have been able to skew in their favour, particularly pertaining to consequential loss, for example.  That is right.  I could not agree more.  I think the decisions on consequential loss, frankly, have been a travesty.  I have never seen a correct decision on consequential loss.  Those areas of ambiguity need to be discussed openly.  I think the rules and parameters have to be agreed so that everybody knows the rules that are being applied.  Those are some of the things I was thinking about in terms of the challenges and what we have to establish early on.  There is a serious lack of trust obviously in banks, but also in reparation and redress schemes and that lack of trust has to be rebuilt.  SMEs need to feel that there is certainly someone who is genuinely and truly impartial.  I think the idea of having somebody who can support them through the process is also pretty critical, because they need to feel support is available and there is somebody there to help them on their side going through the process.

The final point I would make, and it is something I have touched on, is this imbalance of power.  It is an imbalance of fire power and a general imbalance of power.  We all know that there has been raft of the bad banking behaviour.  I have a personal horror library of truly appalling things that have been done and said to SMEs that, sadly, we have collected years.  There has to be an accountability for that behaviour.  It might not necessarily sound in damages in the way a solid consequential loss claim will sound in damages, but there has to be a way in which banks need to face up to that behaviour.  It is vitally important.

JON McLEOD:  Cat, thanks for that.  Perhaps one final question.  As you have alluded to, the BBRS will provide a network of customer champions who will support and guide customers through the BBRS process without acting as advisers.  BBRS has also maintained a form of agnosticism in relation to the participation of professionals and experts, for example, whether or not someone should be assisted by a claims manger or by a solicitor.  I hate to ask a question close to home, but is there a role for a solicitor or professional practitioner in looking through the BBRS process?  What is your take on that?

CAT MacLEAN:  In a sense this sounds like a very self-interested answer because in short, I think there is.  Let me explain why I very genuinely feel that is the case.  It is not true in all cases and I think for some claimants just having that champion may be enough.  But, as Adrian has already talked about, for example in consequential loss, and it is true not just in consequential loss, this issue of causation can be a surprisingly tricky concept to translate and articulate clearly and logically.  In my view, quite a number of clients who have come to me have struggled to differentiate between bad banking behaviour that is truly appalling that has not necessarily directly fed into the outcome, and bad banking behaviour that absolutely has caused the outcome and the result.  Separating those things out is very important.  Adrian talked about the need to have what you are saying well evidenced and set out with proper logical argument.  That is not always terribly easy and it is not necessarily terribly easy to set out and proper articulate in a sensible logical well evidenced well vouched way, even for customer champions.

As I see it, in some cases, particularly complex cases where there is high emotion, it is important to have the customer champion there to help absorb and maybe separate out and pull together time‑lines and generally provide support, particularly if people are finding the whole thing very difficult.  I think there is still a role in those cases for lawyers to take sometimes a big bucket of information and pull together the different silos and say, “This information is going be to really key to what we vouch in relation to causation and consequential loss.  This information over here pertains to really appalling bank behaviour, but we are going to advance that separately because it is not necessarily going to sound in damages.”

It is really critical that there is proper articulation of the loss, that causation is understood.  It is about identifying the actual loss; not stripping out emotion altogether but separating it out and saying the emotional aspect is here and the consequential loss is here.  There is a role for that to happen perhaps not in every case but in some cases.  I have seen claims that have been advanced by clients, for example to FOS, in almost a stream of consciousness.  They subsequently come to us because they have not succeeded with FOS.  We have looked at it and when you look at the stream of consciousness you can see that there are elements in there that could be advanced in a legal way, possibly even litigated, but they are almost obscured and buried in a lot of stuff that FOS has looked at it across the piece and said that it is just a stream of consciousness and there is nothing in there.  Sometimes the good points, in the sense of points that can be really hammered home to the bank can be lost in the other noise.  There is a role for solicitors in pulling out those points that really can be hammered home that could be make the difference in, for example, a consequential loss claim or establishing there is a clear loss that has been caused by the behaviour on the part of bank.

JON McLEOD:  Cat, thank you for that extremely useful answer and thank you for your participation this morning.

We can now move on to the next stage of the round table session today full of ideas and questions and thoughts, as a result of those really stimulating and interesting questions and presentations that we have heard.  I will be handing over to Lewis in a second to give some initial reactions to the presentations.  I will alert everyone to how we are going to handle the next part of the round table. The first section will deal with pre-submitted questions.  A number of you have sent questions in in advance.  We will try and work through those.  We have grouped them thematically to try to deal with the big issues that keep coming up again and again.  Once we have worked through that, I want to turn our attention to questions that are being submitted live.  I am receiving them here and I will be able to put them directly to the panel, and we will have an element of interactivity.

Could I ask Lewis to give his initial reaction to what he said on the expert panel and his thoughts on the contributions that have been made?

LEWIS SHAND SMITH:  Thank you very much to all the contributors.  Thank you for being so persistent in staying with us and thank you for your contribution, too.

What came across to me was something that I knew already but all of our speakers have really driven this message home. It is the complexity of what we are trying to do, the complexity of the nature of the cases and, as well as the complexity, the high emotional involvement, which is something we as the BBRS have been aware of.  You have really brought that home to us.  That is one of the reasons why we are providing what we are calling a boutique or tailor-made service.  Every single case that comes in will be considered on its merits.  You will not get into a process, as has been touched on, where a complainant is bounced from one part of the process to the next.  It is very much tailor made to the needs of the particular complaint and also to the needs of the person bringing the complaint.

That is also one the reasons why we have the customer champions in place.  They are there to support people bringing complaints.  I completely take Adrian’s point on the possibility of conflict.  We are well aware of that, Adrian, and it is part of the training that is being given to the customer champions.  They are not there to make any decisions on behalf of the person bringing the complaint.  Nor are they there are to advise them on what they should do next.  They are there to support them to ensure they are comfortable with the process, very much to Cat’s point, to stand shoulder to shoulder with them as they go through that process.

We have mentioned Derek Carlyle.  The point that Derek makes often, and I think he is absolutely right on this, even wis hen a complaint is decided in favour of the person bringing it, even then people will need a great deal of support because with historical complaints this is something that that is become absolutely the life’s work for someone.  At the end even if they have got the answer they want, it is going to be quite difficult for people.  That support is needed the whole way through.

The point was also made about transparency and openness.  Again, that is critical to the success of the BBRS.  One of our principles is we will be transparent, open and there will be a sharing of documents both ways.  That can be done on our computer CMS system, but it can be done in other ways as well.  You will see the information that has been provided by the banks.  The banks will see the information you have provided, and you will be able to challenge that information and add to that information but that is definitely part of our process.  The point was raised by Ian that there are just seven banks.  There are just seven banks because it is a voluntary scheme.  Our hope and our plan is that we will encourage other banks to join.  We know others are keen to join, but it is important that we extend this so that as many banks and lenders as possible are part of the scheme.  I know the seven banks that are there at the moment are keep that that should happen as well.

Andrew Bailey has been a strong supporter of this right from the beginning.  He is continuing to support it, and we really appreciate that.  We, like Andrew, want to make sure that the BBRS provides the answers and brings resolution to a meaningful number of cases. To quote Philip Hammond when he was Chancellor of the Exchequer, we really aim to bring that resolution and bring it to a meaningful number of cases.

JON McLEOD:  Lewis, thanks for that initial reaction.  You have addressed one of the questions I wanted us to pick up from Ian’s presentation about the level of participation from banks.  It is a voluntary scheme which starts with seven, but it could go further, subject to its success.

I am going to start with three questions to our panel assembled here today.  I am going to start with one of the big questions which is: how will the BBRS deal with cases which have been through independent or so‑called excluded schemes?  How can those cases acquire any closure if they are not able to access the service? I understand that the final definition of an excluded scheme is to be determined by the implementation steering group very soon, but alongside that there is a so‑called boundary process which will create an opening potentially for those cases.  Could I ask the chief adjudicator Alexandra Marks just to tell us a little bit about what the boundary case process is looking like and a little bit about her approach to it, and how it will interact not only with potentially excluded schemes, but also with schemes which may fall at the margins of eligibility, for example a threshold in relation to turn over or staff or a threshold in relation to the timing of complaint.  Alexandria, could you give us what the approach is to that important issue?

ALEXANDRA MARKS:  Thank you, Jon.  From the outset, I think it is important to recognise that the concept of the BBRS was to provide a system for dispute resolution for those SME customers who had not had the opportunity for a review of their case previously.  That meant that cases that had already either been to or were eligible for the Financial Ombudsman Service, or previous review scheme, were to be excluded .  The same was true of cases that had already been litigated in court or were in the course of litigation.  However, there has been slight movement on all of those in the setting up of the BBRS.  As you rightly say, Jon, there is going to be a boundary process.  What that means in terms of excluded schemes is that if a customer has been through an excluded scheme and had an outcome but now has new evidence which has not been considered before, they can either go directly to their bank or come to the BBRS and we will direct them back to the bank.  The bank has undertaken that it will examine that new material, consider whether or not it has been seen before, and, if it has not, it will reconsider the outcome of the case.  In either event the bank has undertaken to give both us and the customer their reasons for treating the case in that way.  If a customer is dissatisfied or wants a further explanation, they are welcome to come to us to discuss what has happened and to gain further understanding.

I think this is really crucial from our point of view because it achieves two objectives, and possibly three.  The first is it gives us an opportunity to listen to the customer and hear what their complaint is; if they are still unsatisfied and why.  Secondly, it enables us to gather evidence about what the issue is and understand ourselves much better what the complaint is actually about.  Thirdly, there is a possibility, as I say, in the right circumstances where we can approach the bank and ask them if they will agree and the customer will agree to us considering the case potentially through to adjudication, but perhaps using another technique of dispute resolution such as mediation which has been mentioned several times today.  That is the way it applies to excluded schemes.

There is also a boundary process envisaged for cases that are otherwise ineligible for the BBRS, as you say Jon.  This might be cases around the margins that have just missed eligibility criteria, the financial criteria, or perhaps their case has been declined jurisdiction by the Financial Ombudsman Service.  Again in those situations, if the customer brings their dissatisfaction, their complaint to us, then we will approach the bank to consider whether that case is one that we should take on.  If we, the BBRS, think it is a proper case and give our reasons to the bank why we think we should look at it, they have undertaken in good faith to consider that and give us their reasons if they disagree.

JON McLEOD: We have had a question about vulnerable customers.  I think one or two of the expert presenters referred to the fact there is a lot of emotional pressure on individuals who have been through these very difficult experiences and indeed, because of the passage of time, sadly, some customers may not be well.  What are we going to do to prioritise and support vulnerable customers?  What is the approach of the BBRS to those who identify themselves to us as vulnerable?

ALEXANDRA MARKS:  First of all, it is very important to say we recognise that some customers, and we are assuming not all, will be extremely vulnerable for a variety of reasons.  As you say, Jon, it may be to do with ill-health or financial hardship, or bereavement, all sorts of reasons.  We have a vulnerability policy which we will be publishing along with the BBRS’ scheme rules and policies on other issues such as consequential loss so that everyone will be able to see what rules and policies we will be applying.  Clearly, it is important that we are able to establish from those customers what their circumstances are.  So far, as many in the audience will know, we have only very brief information about customers because they were invited to complete a very short registration form when registering their interest with us.  Some volunteered the fact that they were in ill health or had other aspects of vulnerability, and those have been noted.  Of course, that will in many circumstances mean that we will attempt to prioritise their cases if appropriate.  However, it is not always going to be appropriate.  In some cases, it may mean that we will simply provide additional support to that customer as they need to take their time rather than being rushed through the process.  We are planning to produce a prioritisation policy which will indicate what factors we can take into account.  There will be some circumstances unrelated to the vulnerability of the customer but instead related to the nature of their case.  If we have several cases around a similar issue, for example, we may want to look at them together rather than each wait their turn bearing in mind our default position is first come first served, so we will be working through cases broadly speaking in the order in which we have received them.

JON McLEOD:  Thank you.  That is very helpful.  I want to see if I can turn to Lyndy now on the training and development of staff.  I am conscious that you will be working with the Centre for Effective Dispute Resolution (CEDR) in delivering services and supporting case handling.  What sort of training and development will staff get to support customers who have these types of vulnerabilities?  What is your approach to it, Lyndy?

LYNDY GEDDES:  As you rightly say, our partner CEDR is incredibly helpful here.  They have a great deal of experience in running dispute schemes of this type.  We have already seen the fruits of their high level of empathy and customer handling experience in the live pilot.  We have had very strong overwhelmingly positive feedback about that.  That in itself is forming the base to our policies, guidance and learning and development programme for our staff.  Into that we are taking industry best practice, legislation and the FCA guidelines.  We are also taking advice from various charities that support vulnerable people, to make sure that we can support our customers as comprehensively as we can.  I may have got cut off earlier.  One of the things I was saying is our live pilot experience has given us a really good feel for the nature of support that our customers need.  That has very much filtered through to our learning and development programme, particularly for our customer champions, so that we are confident we are able to meet the needs of our customers when they do engage with the scheme

JON McLEOD:  Thanks for that.  I am going to move on to the question of independence and the independence of the BBRS, and to look at that in a number of different dimensions, starting with Samantha Barrass, chief executive of the BBRS.  The challenge is how can an organisation which is entirely funded by the banks be independent of the banks?  Samantha, I would be pleased to get your response to that point.

SAMANTHA BARRASS:  Thanks, Jon.  I understand the question, and getting back to Cat’s points earlier, it is very important, when we have been putting together this scheme and working with all of the stakeholders around the ISG table and the banks, that there is very much an understanding that there needs to be confidence.  This scheme needs to feel different.  There needs to be confidence in the financial independence of the scheme.  We will be publishing a summary of our funding arrangements.

It is very common for ombudsman schemes, and indeed regulators and others, to be funded by the relevant industry.  What matters is the approach to how the financing works and the governance and the structure.  The BBRS has an independent board of directors and an independent executive team, independent governance and staff.

Critically, with the approach to funding, and we are nailing down the final details at the moment, we are looking at an overall three‑year funding approach which will have annual increments.  The first year is more or less already agreed and it is going to be sufficient to enable a flexible responsive approach to this.  Then for the following years, the approach we are looking at that is the amounts have to be reached by agreement.  If there is no agreement on the overall macro for the funding then the previous year’s funding continues.  Critically, banks cannot withdraw funding.  I know from looking at the questions and concerns coming in that what stakeholders are going to be worried about is: “Can banks suddenly withdraw funding and will that have an impact on the approach to my case through the BBRS?” That cannot happen in the way that we are setting it up.  We will be publishing the overall approach to the funding structure on the website because we really do understand the importance of providing that assurance.

JON McLEOD:  Samantha, thanks for that.  I would like to turn to Lewis because independence is about governance as well.  Could you share a little on how you have satisfied yourself that you will be able to act genuinely independently and have an independent board supporting you in doing that? It is an issue that has been raised across a number of questions, and indeed outwith this round table process.  Lewis, I would be interested in your comments on that.

LEWIS SHAND SMITH:  As Sam said, independence is absolutely crucial.  We have a board.  It is a board of a company limited by guarantee.  The BBRS is an independent company with an independent board.  That board is responsible for its own independence as individuals on the board but also responsible for the independence of the BBRS.  They are subject to the Companies Act.  If there should be any hint that they are not independent, they would be in breach of the Companies Act.  Believe me, every single member of the board takes that really seriously.  We are going through the final stages of documentation now and the board is scrutinising that, and if there was anything in that documentation that would compromise their independence as non‑executive directors or compromise the independence of the BBRS, they would not accept them.  I can categorically assure you that the BBRS board will be independent, the BBRS company will be independent and because that is independent, crucially, and this really matters most, the decision-making when we deal with complaints will be completely independent.

We also have a board to make sure and guarantee the independence of Alexandra and Lyndy and their teams.  That is an additional duty on top of the general directors’ duties we have to follow.  We all have that responsibility to ensure that the complaint handling is independent.  It also means that the board itself cannot interfere in any way in the decision-making part of the business in the actual services that the business is running.  Should someone approach a member of the board and say, “Can you help me get my case in?” – no way the board should do that.  Should someone approach the board and ask about their case ‑ no way can the board respond to that.  The board has to ensure the actual complaint handling, the service that is provided is independent which means it cannot interfere in individual cases

JON McLEOD:  Lewis, thank you for that response.  I am going to move on now to a question which was touched on earlier which is the matter of insolvent and dissolved companies.  I am going to go over to Alexandra to see whether she would like to share with us what we see as our approach to the inclusion of insolvent companies and how that is likely to play out once BBRS goes live.  Alexandra, I turn to you for a response on that point.

ALEXANDRA MARKS:  The basic position is that there is provision for both insolvent companies and even dissolved companies to bring complaints to the BBRS.  The key issue is who is going to be doing that on behalf of a company which is either insolvent or dissolved. Broadly, that person will be the company’s insolvency practitioner or an appropriate person authorised by the IP – probably one of the company’s directors, or shareholders.  These will all be legitimate complainants to the BBRS.

JON McLEOD:  I am going to go on to the question of how one enforces an award, and indeed the approach we have already had discussed this morning to consequential loss.  Alexandra, it is your lucky day.  I am going to return to you, both to hear a little bit about what happens after an award is made and the enforcement of an award and how we ensure that an award gets paid.  Within that mix the question is being asked whether the award threshold, given what we have heard about consequential loss, will be genuinely sufficient.  What would happen in a case where you wanted to recommend an award that was in excess of those thresholds?  Could I get your perspective on those two points, please?

ALEXANDRA MARKS:  The basic proposition is that for the historical scheme, cases that arose before 1 April 2019, so up to 31 March 2019, there is a binding limit of £350,000.  For cases after that which therefore fall into our contemporary scheme, the binding limit is £600,000.  However, there is provision in the rules for the BBRS to make an award above that level, a so‑called recommended award.  The banks have accepted that there is an expectation that they will meet that recommended award.  If they choose not to, because the very fact it is not binding means they can choose not to, they have to give their reasons for not doing so.  What is more, in the scheme rules it is clearly identified that the customer will know before they accept the award, if they are minded to do so, whether or not the bank has accepted the recommended award if it is above the binding limit.  If it is not above the binding limit, the bank will be contractually bound to pay that award.  That means the award is enforceable in court.  Of course, we recognise one of the reasons customers are going to be bringing their complaints to the BBRS in the first place is because they do not want to or cannot afford to go to court.  We think it is highly unlikely there will be any need to take enforcement action for those awards, but should there be any delay in payment of awards, et cetera, of course the customer can come back to us and we can take it up with the bank accordingly.

JON McLEOD:  Thanks Alexandra.  Do you want to add anything on the approach in relation to consequential loss?   We had Adrian Maurice’s presentation about some of the factors that are brought to bear in making those decisions.  What is your take as things stand on factoring that into the making of an award?

ALEXANDRA MARKS:  On consequential loss, again, as I mentioned before, we will have a published policy on our approach as well as our rules which indicate what consequential loss means in the BBRS.  Broadly speaking, we are following the legal principles which Adrian outlined about causation, foreseeability, remoteness and so on, with a fair and reasonable gloss, if I can put it like that, in order to reach a decision on what is fair compensation in those instances.  The rules have a provision which basically says that consequential loss can be decided separately and after the main claim.  And it was partly because of that and partly because we did not have complex cases in our live pilot that it was not appropriate to deal with consequential loss during our live pilot.  But I do want to assure Adrian and the audience that we have thoroughly tested our consequential loss approach and policy by running a series of workshops with both banks and SMEs to work through numerous case studies.  During those workshops, we explained our approach, what information we would require and how we would reach a decision in those cases.  We are comfortable and confident that the consequential loss approach that we are proposing in the BBRS has indeed been tested before we go live with real‑life cases.

Perhaps just to finish off on this point, we also recognise that some of these consequential loss claims can be very complicated.  In those sorts of situations, we anticipate there will have been a decision already on the liability; in other words, was it the bank’s fault and did they cause loss of some description?  If we consider that any consequential loss claim is a complicated enough to require legal or expert advice, provided the customer comes to talk to us before engaging any lawyers or other experts, then those costs may be recoverable.

JON McLEOD:  Great.  Thank you very much, Alexandra.  Sorry to throw so many questions your way.  I am going to switch to live questions which will be slightly less thematic, but I hope I have been able to cover in the pre-submitted questions the themes of excluded schemes, the boundary case process, the position on insolvency, the position on consequential loss and the position on independence, all of which are things which are raised often in the public debate about BBRS, so we very much wanted to engage on those points.

We are going to go a little more unstructured as these are questions coming in now.  I have a question from Rod Hilditch, which I think is a question I should direct at Lewis because it is about the BBRS board.  Rod’s question is: has anyone on the BBRS board been an SME?  I take that to mean an SME owner or an entrepreneur who has run and set up their own business.  Lewis, could you take that question, please?

LEWIS SHAND SMITH:  The simple answer is yes.

JON McLEOD:  You might want to call out the members of the board.

LEWIS SHAND SMITH:  The answer to that is yes.  A perfect example of that is Lucy Armstrong, who is on our board.  She may be taking part and listening to this just now.  Yes, we were very mindful when we created the board to get as wide a range of experience as possible.  And yes there are members of the board who have created businesses from scratch, start‑up. Certainly Lucy has and is an expert in supporting other businesses to start up.  Yes, likewise, we have members of the board who are well experienced in the areas that we are looking at.  Can I just emphasise that the board does not take part in dealing with complaints.  The board must make sure that the complaint handler bit is independent.  Their job is not to do with handling complaints but to ensure the BBRS is independent and that it is following its fiduciary duties, that it is compliant with the Companies Act, and that Alexandra and her team have the resources they need to carry out the complaint handling function.

An example of that, and I know it is a question asked of us often: do we have the resources to deal with those cases we describe as boundary cases?  Again the answer is yes.  Again it is a responsibility of the board to make sure that that is in place.  Their responsibility is for running the company.  They do not have a responsibility for running the complaint handling process because that must be independent of the  board.

JON McLEOD:  Thanks, Lewis.  A couple of questions for Alexandra.  We had a particular question submitted about whether or not we would be able to consider cases involving the Law of Property Act, so‑called LPA cases.  I would be interested in your view as to whether or not we welcome the registration of cases involving those statutory provisions.  In a slightly similar vein, there is a question asking to what extent will we take into consideration other codes of conduct and other regulatory frameworks and laws in our adjudications.  I guess that could be part of the same question.  I am keen on how you factor in the much wider, very broad statutory and regulatory environment that sits around some of these cases.

ALEXANDRA MARKS:  Let me take the Law of Property Act receivers first.  They are appointed when there is a potential insolvency situation.  My earlier answer applies to that.  As for regulations and codes, we take all that into account.  We are aware there is a lot of material in this particular area.  We were discussing just yesterday in the context of some of the cases we are looking at various codes, payment service regulations, BSIs as well as the more common regulatory requirements.  All of those will factor into our decision-making, including of course, crucially, the principles that are applied by the FCA to banking activities, about treating customers fairly, and other related principles of that nature.  Yes, those will all form part of our decision‑making matrix.

JON McLEOD:  Thanks for that.  I have had a number of questions about evidence and the function of evidence in adjudications.  I will try to serve three at the same time, if that is okay, Alexandra, and apologies again for hitting you with this.  There have been a couple of questions about concerns about the absence of evidence, or suggestions from customers that evidence has indeed been lost or destroyed.  There is a second question which is about supporting SMEs through the process where they may struggle with the weight of evidence, and how they need to be supported by the customer champions in terms of sifting evidence.  The third question is about visibility of evidence.  In other words, to what extent will customers be given access to disclosed documentation from the other side, from the banking side, which is supporting at first instance bank decisions, and what role will the BBRS be able to play in bringing that evidence to light?  The disclosure of lost evidence and helping customers with the weight and burden of evidence which they may be try to sift through in order to take forward their case.  Alexandra, by all means, if you feel Lyndy might help on the latter part, let’s bring her in.

ALEXANDRA MARKS:  Let me start.  This issue is of particular concern, I think, with the more historic cases which stretch back nearly 20 years now. It is unsurprising that there may be insufficient contemporaneous evidence to exactly identify what has occurred.  This is quite a difficult topic, but the position that I am pushing for is we look at the evidence holistically.  We look at all the evidence some of which may be described as circumstantial, or  may be a pattern of evidence.  For example, if we have a particular complaint that is very similar to complaints we have had from other customers of the same bank, the same branch or perhaps even the same bank manager, that would help us establish a picture overall.  I want to emphasise that evidence is absolutely crucial.  I have been a judge for 17 years and therefore fully understand the importance of assessing evidence and giving appropriate weight to the various types of evidence.

To go the opposite end of the scale almost, to the second part of your question, Jon, which is what if there are mountains of evidence, will this be overwhelming for customers? It was precisely that kind of concern that led to the establishment of the customer champion role.  We do not think it helps us to help customers if we receive a lorry load of documents from them at the outset, when, as Adrian articulated in his presentation, some of it may simply not be relevant to the particular claim that is being made.  The whole purpose of the customer champion role in its initial stages is to help the customer sift the evidence they have accumulated.  It is important to stress that the customer champion is there to assist and support the customer throughout their engagement with the BBRS.  The customer champion will be there to explain to them what the process is, what happens at each stage, right through to the outcome and determination.  The customer champion will of course listen very carefully to the customer at the outset.  It is a pre‑condition of complaining to the BBRS that you have already taken your complaint to the bank and are dissatisfied with the outcome, so that would be a very sensible starting point for any complaint that is brought to us.  The purpose that the customer champion will be fulfilling is through talking with the customer and looking at the early material and looking at the other sorts of evidence they might have. The customer champion might ask:  “Have you still got the document from the bank that said so‑and‑so?  What happened when you wrote and asked for XYZ?  Did you get a reply to that question?”  That sort of thing.  The whole purpose is to create an incremental approach to building up an evidential picture of exactly what has happened.

A final point, and this is important too in building up the evidential picture, is that the BBRS is going to operate in an open and transparent way.  Both the customer and the bank will upload their evidence once it is clear exactly what the complaint is about.  When that evidence has been uploaded by both sides and not before, it will be exchanged simultaneously and made visible to each other, so they will both be able to see what the other’s evidence is. Each party will also be able to comment on that evidence and, if they wish, produce further evidence to respond to an issue that has perhaps been raised that they did not expect to be raised.  The intention is to be totally transparent about the evidence that is being relied on.  We appreciate that in some instances one party or the other may want to submit evidence which they regard as confidential and do not wish to disclose.  That is something that the BBRS will have to make a decision on.  If it decides that it needs to be disclosed, possibly in redacted form if appropriate, it will say so. If the party producing that evidence, which the BBRS has decided should be disclosed, refuses to disclose it, then that evidence cannot be relied on in the making of the decision.  Each side will know exactly what evidence has been seen and relied on before the outcome decision is made in the case.

JON McLEOD:  Thanks, Alexandra.  The point about the burden of evidence and the slight David and Goliath element that needs to be guarded against in all this reminds me that we have Rachel Couter on the line.  She has been representing and advising the SME groups during the formation and design of the BBRS scheme.  Rachel is a partner in the law firm Osborne Clarke.  I wondered, Rachel, whether you could comment on the extent to which you are now satisfied that the scheme does deal with that issue of inequality of arms and that it will be a scheme in which customers can genuinely have confidence they will be supported to deliver their cases effectively and not be overwhelmed by a much mightier entity on the other side.  I would be interested in your views on that, Rachel.

RACHEL COUTER:  Thanks, Jon.  The role that I have taken during the course of this process is to review the contractual documents, the articles of association and the related operational agreements and also the scheme rules to make sure that what the BBRS is being set up to achieve, in effect, will be able to achieve that.  Obviously, from a bank’s perspective, they have vast swathes of internal lawyers.  They also have external lawyers and they have the finances to pay for those swathes of lawyers.  The concern from the SME groups was that they did not have the equivalent representation to make sure the banks were not pulling the wool over their eyes and were not sneaking things into the documents that would negatively impact them and make the scheme not work as it should.  That is a role I have been undertaking.

Picking up on Lewis’s point about independence, we have had corporate lawyers look at it to make sure that the articles of association work from a corporate perspective to ensure the BBRS is independent from the banks and can make operational and other decisions without you needing to go cap in hand to the banks on a regular basis.

From the scheme rules perspective we have been looking at them to make sure that Alexandra and her team can exercise the judgments that she and her team will need to exercise in order to be able to deliver the fair and reasonable outcomes by reference to legal principles and guidance and all that kind of thing, that the BBRS is aiming to achieve.  We have also been working very hard to make sure that the other contractual documents the banks are signing up to have the obligations or the good faith promises, for example, to pay awards, to co‑operate with the BBRS to produce documents and that kind of thing.

JON McLEOD:  Thanks for that, Rachel, that is very helpful.  Going over to Samantha Barrass, a couple of questions that have come in since we have been on, one more immediate term and one in the medium to longer term.  First, Samantha we are going through the final stages in relation to the finalisation of the scheme.  What is going to happen next in terms of the time‑line and the preparations for the service to go live?  I understand the rules are being finalised very soon and indeed there has been considerable progress on the computer customer management system that will support the entire thing.  I would be keen to hear about that.  Stephen Shearer asks: what are we doing and what are we going to do to encourage other bank to join the scheme?  What is the action plan in relation to broadening the scope of the scheme?  Clearly at the moment if someone is a customer of a bank that is not participating, they cannot have access.  How do we broaden access by inviting more banks and institutions into the tent?  I would be interested in your views on those points, Samantha,

SAMANTHA BARRASS:  Thanks, Jon.  Running alongside the work we have been discussing over the scheme documentation and scheme rules, and again it is to the point we were discussing earlier, in building a scheme that is going to be different, it is around what it feels like to come through as a user of the scheme.  We have been very focused on two things getting ready for delivery.  The first has been operationally setting ourselves up and making sure that we are able deliver a bespoke, transparent, very human service that is supported by a good case management system.  That is going very well.  On both those fronts we are very well set up now.  The key BBRS team is in place and the key CEDR team is in place with the customer champions.  The case management system has been developed and tested, on time and to budget, which is a first.

There are some really important things in the case management system, to reflect on points that Alexandra has just made.  It needs to be enabling the process that we have.  It needs to enable the sharing of documentation.  At the same time it needs to support and not be a “the computer says no” process.  The case management system we have is very capable of supporting both the road to go right from when there is a registration of interest, but also about being able to come out with a more adjudicated process if there are other forms of alternative dispute resolution such as mediation that are going to work.  That is all up and ready to go as we go into the back end of November.  We are just in the phase now of working on our training and making sure our team have all the support materials that they need.

To the second question on encouraging other banks to join, as we go into the end of this year, beginning of next year, Covid permitting, I am hoping to be in Northern Ireland in December supporting the launch of the scheme there.  I am hoping to do some visits to banks there.  We are very much going to be reaching out and working with other banks to support bringing them into the scheme.  For me that is going to be a big piece of it and one of the many things I am going to be looking to do as we go into the beginning of next year.

JON McLEOD:  Thanks, Samantha.  Lewis, I just wanted to pick up on a theme which is reflected in quite a number of questions which have been submitted ahead of today’s session.  People have been expressing a concern they might be excluded from BBRS as a result of the drawing of the eligibility criteria.  I am assuming that you would say to people “do not self-exclude”, register and because of the approach we are able to take on boundary cases, we will take an earnest look at what comes in through the front door.  I would be interested in your views and reaction to the fact that we have had a number of questions about people who are concerned about being excluded for a variety of reasons.

LEWIS SHAND SMITH:  I think it goes back to what we were discussing earlier about the mechanism for the boundary cases.  Do not self-exclude.  It is the message we gave out at the time we launched the live pilot.  Register an interest.  Your case will be looked at.  The evidence will be looked at and you will be listened to.  It will nonetheless be case there are complaints that will not be eligible, but we will give very good reasons for that.  There is an appeals mechanism built into that too.  If you get a no from us, there is an appeal built into that.  If you are on the edge or your complaint is in one of the excluded schemes, that boundary mechanism is there.  That boundary mechanism goes much further than Walker envisaged and much further than the terms of reference of the steering group setting this up was given.  That is a huge advantage, because one of the key principles people asked for at the beginning to have the opportunity to make their voice heard.  Alexandra has very clearly articulated what that means.  Do not self-exclude.  The macro eligibility criteria, obviously if it is not from one of the seven banks, we can do nothing with it.  If you are a very large business indeed we will not be able to help you.  But there will be ambiguities and nuances and we will look at those very carefully before making a decision on eligibility.  It is really important also to emphasise that the eligibility on an individual case will be determined by the adjudicator and her team.  It is not a case, as Samantha has said, where you will be coming in this as a sausage machine and if you tick 60 million boxes you are in but if do not tick those boxes, you are out.  That is not how we are operating this at all.  You will be listened to and you will get the opportunity to put your case, and if the answer is no you will be given very clear reasons for that and the chance to appeal that, which is quite significant.

JON McLEOD:  Lewis, thanks for that.  I have a question that appears as a theme across a number of those submitted, and I think it is for Alexandra to pick up, which is: how would the BBRS disentangle a complaint where there are elements of concern about alleged or potential criminal conduct, for example fraudulent conduct which has resulted in the loss or mistreatment which is being complained about?  I guess there are two elements.  How do we unpack it but also what is the BBRS’s stance on these cases?  Does it put them to one side because there is an allegation of criminal conduct or does it unpack them and proceed with the civil components?  Further to that, would it advise the police or other competent authority if there are material allegations of criminal misconduct?  Alexandra, this is an important question which I know has worried lots of those raising questions and lots of those who registered.  We would welcome hearing your take on that.

ALEXANDRA MARKS:  Thank you, Jon, for asking because, as you say, it is a very important point and one that, as we have heard, has given rise to a lot of concern.  It is important to stress, although I hope it is obvious, that we are not a criminal investigation organisation.  However, that absolutely does not mean if there are allegations of forgery or fraud or what have you that we will turn the case away.  We will not.  We will look at a complaint and we will continue to look at the evidence of that complaint, irrespective of the forgery or the fraud that has been alleged.  That may be an element of great significance in another forum but it is not one that is going to be crucial to our investigation.  We are looking at what actually happened and what happened to this customer as a result of what the bank did such that fair compensation should be given.  I think perhaps people do not necessarily appreciate, even if fraud or forgery were to be established, and of course that is a matter for the police and for the Crown Prosecution Service and the criminal justice system generally, that does not necessarily, and very often does not lead to compensation for the individual victim of that crime.  We are not looking at the case through that particular lens.  We are looking at it from the perspective of whether what the bank did caused loss to that customer and, if it did, what is the amount of that loss, and what would be fair compensation for it.

JON McLEOD:  Alexandra, thank you for that.  Even as I speak, we continue to receive questions about time limits and our decision-making schedules.  We will answer those in writing after the event, and indeed, any other questions that we have not been able to address today.  I am going to hand back to Lewis for some brief closing words before he hands back to me to close today’s proceedings.  A brief closing thought from you please, Lewis.

LEWIS SHAND SMITH: The first thing I want to do is say thank you to all of you who have contributed and who have sent in questions, to those of you on the panel who have been answering the questions, but also to the experts who give the presentations earlier.  It is much appreciated.  I will reiterate what I said before.  We do not under‑estimate the complexity of what we are taking on and the need to ensure that the approach is tailor made to each person and each complaint.

I would also like to emphasise the point that we are going further than the original remit.  The banks have done this in good faith.  The boundary mechanism is taking us much further than we originally envisaged.  We must be grateful to the banks for that.  The banks are setting up this scheme on a voluntary basis.  They are doing so in good faith.  The documentation is now going through its final phases and, as Rachel has said, every detail is being scrutinised.  The board is independent and will ensure the independence not only of the company but the independence of the complaint handling function.

One thing we have not mentioned of course, and again it is going further than was part of our remit, is we are setting up an SME liaison panel, so there will be continuous dialogue with the SME community.  You asked me the question about the SME community.  I got that one right but not quite right.  We have people on the board who have run SMEs in the past.  Of course, I forgot about myself.  I was the chief executive of an SME for ten years.  I have that experience.  It started off as a small SME with a turnover of about £3 million and by the time I left it it was a much larger company, but none the less it was an SME.  So I have been the chief executive of an SME and I am on the board.

The final thing to say is yes we are going through the final stages of the documentation.  The last few weeks have been turbo charged, to use one of Sam’s favourite expressions.
Again to follow up what Sam said in terms of providing the service, the BBRS is now ready to deliver.  It is in place.  It is just that final documentation that needs to be signed off but we are ready to go.  Thank you all very much indeed.

JON McLEOD:  Thank you, Lewis, and thank you for those closing remarks.  I would just like to finish by thanking Rachel Couter, Osborne Clarke, Lewis Shand Smith, chair of the BBRS, Alexandra Marks, the chief adjudicator, Samantha Barrass, the chief executive, Lyndy Geddes, the director of operations, Peter Taylor, the director of legal and policy.  And also our four expert presenters, Adrian Maurice of Pragmaticum Ltd, Ian Lightbody – apologies again, Ian, for the technical challenges, but I think we got there in the end.  Thank you to Abhishek Sachdev for his presentation, and to Cat McLean.  All of the presentations will be circulated with a transcript of today’s proceedings and we will also circulate a response to the questions that we did not get round to answering.  It is 12.31 so we have overrun by 60 seconds, so apologies for that.  I hope you enjoyed the round table and we look forward to being in touch again in the very near future.  From London the very best wishes from us at the BBRS.