For a recent assignment I was required to opine and assess the fairness of decisions taken by a major domestic lender’s restructuring group during the financial crisis and their impact on distressed SME borrowers.
The bank acquiesced to a review of behaviours and customer outcomes following a number of complaints from business owners who claimed the bank, via its distressed restructuring unit (GRG), used their secured creditor status to charge excess fees and take control of assets. Initially an independent review was conducted by the FCA, under Andrew Baily.
Starting in November 2016 the bank undertook an internal review of all complaints made by business owners, some of which were Directors of now insolvent or liquidated businesses, to assess and make offers to refund excess/ complex fees- the bank provisioned £400m for the project. To ensure a full and fair outcome the FCA required the establishment of an Independent Third Party to hear customer appeals following the initial internal review. This process was overseen by retired High Court Judge Sir William Blackburne and was referred to as ‘The Independent Third Party’ (ITP).
As an appointed ‘Banking Expert’ I was required to work alongside legal Counsel to review all documentation associated with the borrowers appeal and prepare a detailed report based on the evidence and market practices which were in place at the time. As you can imagine, the volumes of evidence were considerable and often held in various formats, including emails (often 7,000+), document pdf’s and voice recordings. The key skill is to assimilate and pick out the salient points and to not be overwhelmed by the amount of paperwork. Importantly, it is imperative the documentation is utilised to build an accurate picture of the events and ascertain the reasonableness of both parties during the process, ensuring that any conclusions drawn are substantiated with evidence in support.
It is important to scrutinise each key stage of the transaction to establish where a party has arguably, on the face of it and on the facts presented, acted unfairly or improperly. Such a picture builds up over time and is not always immediately clear.
I was well placed to opine on the market conditions and standard banking practices, since at the time as I was employed as a Senior Banker within the Restructuring team of another clearing bank operating within the same segment. A key consideration was the difference in standard bank restructuring behaviours at the time as opposed to standard practices employed today, so what may seem aggressive/combative or excessive now was standard market behaviour at the time of the financial crisis.
Initially, the team was working in an office within the City of London, but we quickly adapted to working from home as COVID-19 began to take hold. One of the challenges I set myself was to not print out documents (as was the usual processes in the office) and instead use 2 screens at home to both review and take notes of relevant/ important factors in the cases. As with much of the population I also became adept at using video calls for reviews with colleagues and then to conduct hearings virtually with the Judge. The whole process was managed seamlessly by a major global consulting group who oversaw the process and administration of the entire project.
It can be daunting to try to cram such a large volume of materials into a clear and succinct case/ agreement/ position, but after the first couple of hearings it becomes second nature as you become proficient at picking out the most relevant points or threads. It is important to establish genuine cases and essentially separate the ‘wheat from the chaff’.
The overriding objective is to be open minded and luckily I was able to utilise my extensive experience working within other banks as an invaluable knowledgeable base. I am pleased to say I thoroughly enjoyed the work and I was able to provide clear, succinct and rationalised arguments that were agreed with by the Judges in each of my hearings, much to my relief!