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FSA announces full review of interest rate swap misselling


The FSA has announced that Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland are to review the full extent of misselling of interest rate swap products to small businesses.

In June the regulator said it had found serious failings in the way banks sold interest rate swap products. The four banks have agreed to work on reviewing individual sales and to pay redress to customers following a pilot review of sales carried out by the banks and independent reviewers.

In its initial findings, the FSA reviewed 173 sales of interest rate swap products and found that over 90 per cent of sales did not comply with at least one regulatory requirement. The regulator says a “significant portion” of these cases are likely to result in customer redress, but adds the sample relates to more complex cases which may not reflect interest rate swap sales across the board.

The FSA has set out the review should focus on small businesses who were unlikely to understand the risks associated. Businesses that were within scope last June, such as small subsidiaries of multi-national corporations and special purpose vehicles, have now been excluded from the review.

Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire Banks, The Co-operative Bank, and Santander UK have also had their interest rate swap sales reviewed. The FSA expects to confirm these banks should start their own full reviews by 14 February.

Financial Conduct Authority chief executive designate Martin Wheatley says: “This marks significant progress in our review of these products.  We believe our work will ensure a fair and reasonable outcome for small and unsophisticated businesses.”

Interest rate swaps are designed to protect consumers against increases in interest rates.

In July Money Marketing reported the case of Mike Chadwick, who was sold an interest rate swap by Lloyds in 2007. At the the time he was paying monthly payments of £8,000 for the product and facing exit penalties of up to £800,000 on a £2.3m loan.

British Bankers’ Association chief executive Anthony Browne says: “We are pleased the FSA has reached agreement with the major banks to provide fair and reasonable redress for businesses affected.  Since the problem was identified the banks have all worked proactively with the regulator and independent experts so that the issue can be resolved as swiftly as possible. 

“Banks will be contacting those companies affected shortly, prioritising those with the greatest need. Any business which is currently facing financial distress and is seeking a suspension of payments should get in touch with their bank immediately.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. This could be bigger then PPI by a long way!

  2. One would like to hope that this won’t over-tax the FSA in any way. I mean, after yesterday’s revelation in Moneymarketing, which reported on FSA head of enforcement, Tracey McDermott, appearing before the Treasury Select Committee and openly admitting “I would accept it is easier” in answer to a statement from Chairman Andrew Tyrie suggesting that it is easier to go after the “little guys” than the big banks – and the raft of excuses as to why this might be that followed – it would appear optimistic in the extreme to believe that this is nothing more than further FSA hot air. And apparently, it would also be too much to expect that they would find anyone culpable anyway, since these matters are clearly decided by committee thus making it difficult for anyone to pin anything on specific persons – at least not before they’ve jumped to the next over-paid job. This lot would teach the inventor of Teflon a thing or two!

  3. RegulatorSaurusRex 31st January 2013 at 11:21 am

    Can we have PPI review as well please?

    Cut off the life blood of the ambulance chasers.

  4. How do you put a bankrupt back in the position he/she would have been in had the bank not done the dirty?

  5. Justice delayed is justice denied.

    Never a truer phrase in the case of interest rate swaps mis-selling by the major bank, the majority of cases by RBS (the bank that has been found to have obtained judgment in court by fraud).

    The delays in the FCA Review (in which the wrongdoer banks review their own wrongdoing) are good for banks as customers are less likely to take legal advice when they believe the FCA is aiding to resolve their issue. The reality is they may get no or limited redress.

    Customers must protect their legal rights by issuing proceedings within six (6) years from the date of the hedging discussions.

    After this time they will have no access to legal justice for this mis-selling.

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