SMEs as users of financial services

Date published



We have recently seen two important developments which could raise important considerations around the financial regulatory framework for small and medium-sized enterprises (SMEs).


Firstly, the financial regulator, the Financial Conduct Authority (FCA) has launched a consultation on proposed new rules to allow more SMEs to refer disputes to the Financial Ombudsman.

The proposed changes will allow a broader range of businesses to refer complaints to the Ombudsman in order that they can be resolved quickly and informally and at low cost. The proposals, if enacted, would extend access to the Ombudsman to all businesses with fewer than 50 employees, annual turnover of under £6.5 million and an annual balance sheet total of under £5 million. In total, the FCA estimates around 160,000 more businesses will have access to the Ombudsman as a result of its proposals. The intention is that this will at least in part address concerns raised by SMEs that the significant cost of litigation means that they are denied access to justice, in circumstances where they are not eligible to complain to the Financial Ombudsman.

Secondly, the ‘legitimate’ publication of the FCA’s full s166 Report is expected on 20 February 2018, via the Treasury Select Committee.

The FCA commissioned the s166 Report into Royal Bank of Scotland’s (RBS) treatment of SME customers businesses transferred to its Global Restructuring Group Unit. Andrew Bailey, CEO of the FCA, confirmed that the FCA will continue in its close monitoring role of the RBS to ensure the recommendations from the s166 Report are implemented fully.

It waits to be seen how the report will be received by relevant sectors and whether calls are made for further clarification on issues such as the recovery of losses incurred as a result of businesses treatment by GRG.

Consultation on SME access to Ombudsman

The FCA’s consultation also seeks feedback to an earlier discussion paper on SMEs as users of financial services. Taken together, the consultation, therefore, provides all interested parties with an opportunity to respond and offer their views on how to achieve improved regulation. Achieving that goal should introduce more transparent risk analysis for both lenders and businesses and help them work towards a common goal of growth.

In particular, the consultation provides an opportunity to make a call for further flexibility and innovation in SME financial products – in order for the UK to be seen as a developing and modern financial and banking sector – key objectives when set against the potential impact of Brexit.

The consultation period ends on 22 April 2018.

Road to consultation

  • November 2015: FCA Discussion Paper DP15/7: ‘Our approach to SMEs as users of financial services
  • April 2017: FCA feedback statement on its future mission
  • 22 January 2018: Open Consultation CP19/3 on SME access to the Financial Ombudsman and feedback on DP15/7
  • 22 April 2018: Consultation CP18/3 closes
  • Summer 2018: Policy Statement making final rule