LYG Lloyds Banking Group Plc

By Adam Clark

The U.K. government has welcomed plans by British banks for a new system to resolve disputes with small businesses, suggesting lenders will escape increased regulation.

U.K. Finance, a trade body for the banking industry, said Friday that lenders would fund a specialist ombudsman for larger and more complex cases that aren't covered by existing dispute services. The ombudsman will be able to impose penalties of up to 600,000 pounds ($767,792) without the possibility of appeal.

The plan was backed by seven banking providers to small- and medium-sized enterprises (SMEs) in the U.K., including FTSE 100 members Barclays PLC (BARC.LN), Royal Bank of Scotland Group PLC (RBS.LN) and Lloyds Banking Group PLC (LLOY.LN).

John Glen, the British minister responsible for the financial-services sector, welcomed the proposal.

"I've been clear with the banks that they needed to do more to regain the trust of SMEs, so I'm pleased the industry has committed to set up a fast, free & fair dispute-resolution scheme for SMEs who aren't happy with their financial services. It's the right thing to do."

Mr. Glen's approval may signal the end to the possibility of the U.K. government legislating to create a tribunal to settle SME banking disputes. A parliamentary inquiry is currently considering the case for a tribunal.

Calls for greater protection for small businesses have intensified in Britain in the wake of scandals over corporate lending. RBS put aside GBP400 million pounds for compensation over a controversial restructuring unit accused of squeezing small businesses for cash. Lloyds made a GBP100-million provision to compensate business clients who fell victim to fraud at a Halifax Bank of Scotland unit.

U.K. Finance said the banks had also committed to a service to resolve historic disputes dating back to 2008 and an independent SME advisory council.

Write to Adam Clark at adam.clark@dowjones.com; @AdamDowJones

(END) Dow Jones Newswires

November 30, 2018 11:15 ET (16:15 GMT)

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