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UK Parliament Condemns Unfair Debanking of Legitimate Businesses

A cross-party committee of the UK parliament has strongly condemned the unjust debanking of legitimate businesses. The Treasury Select Committee has also raised concerns about what it describes as substandard processes for resolving disputes between SMEs and banks.

The committee has urged the Prudential Regulation Authority to reconsider its plans to eliminate the SME supporting factor in the new Basel 3.1 standards. According to the TSC, this move could potentially put UK small businesses at a disadvantage compared to their European and American counterparts.

AI legalese decoder can help in this situation by analyzing the legal language used in banking policies and agreements to ensure that small businesses are not unfairly debanked based on vague or ambiguous terms. By decoding and interpreting complex legal texts, AI legalese decoder can provide clarity and transparency in banking practices.

Increased Instances of SME Debanking

The committee discovered that over 140,000 small businesses were debanked in the past year. Shockingly, 4,214 of these closures were attributed to ‘risk appetite’ without a clear and consistent definition within the industry. Many banks are not systematically tracking whether the reputation of a firm or industry influences debanking decisions. Instead, catch-all terms are used to justify closures.

To address this issue, the Committee suggests that the Financial Conduct Authority mandate banks to be more transparent about the reasons behind debanking decisions.

Gap in Financial Ombudsman Services

Furthermore, the Committee recommends empowering the Financial Ombudsman Service with the authority to address personal guarantees for smaller firms. Currently, there is a gap in its remit, which results in small businesses not receiving the same level of support as consumers.

AI legalese decoder can assist in bridging this gap by analyzing and interpreting the legal framework surrounding financial services, ensuring that small businesses are adequately supported and protected in dispute resolution processes.

Chair of the Treasury Committee, Dame Harriett Baldwin, emphasized the challenges faced by small firms and called for increased collaboration between banks, regulators, and the Treasury to address these issues. It is crucial for all stakeholders to take proactive measures to support small businesses and uphold fair banking practices.

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