Seven more banks have agreed with the FSA to review their sales of interest rate swaps and pay redress to small and medium sized businesses where they have been missold.
Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire Banks, Co-operative Bank, Northern Bank and Santander UK have agreed to carry out the review after the FSA agreed the redress programme with four major banks in June.
Last month Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland agreed with the FSA to review interest rate swap sales and pay “appropriate redress”. Following a two-month review, the FSA said it had found “serious failings” in the way the products were sold.
The latest banks to agree to a review make up around 10 per cent of interest rate swap sales in the UK.
The FSA says it has not examined the banks’ sales of interest rate swaps and so has not made any finding of misselling. It says by extending the scope of the review customers who took out interest rate swaps will be treated the same regardless of their bank.
The regulator has also now agreed the terms on which Barclays, HSBC, Lloyds and RBS should carry out the reviews, as cases have to be independently assessed. These include giving each customer the right to have an independent reviewer present during any meetings or calls with the bank.
The FSA says it expects these banks to proceed rapidly with their reviews.
FSA conduct business unit director of supervision Clive Adamson says the agreement from the seven banks announced today shows “their willingness to do the right thing”.
He adds: “Following the agreement announced on June 29, we have pushed ahead with the necessary work to bring this announcement into reality. The terms of reference we have agreed for the independent reviewers shows the detailed and thorough scrutiny that we will expect of them.”
Interest rate swaps are designed to protect consumers against increases in interest rates. Since 2001, the original four major banks have sold around 28,000 interest rate swaps.
Last week Money Marketing reported the case of Mike Chadwick, who was sold an interest rate swap by Lloyds in 2007. He is currently paying monthly payments of £8,000 for the product and is facing exit penalties of up to £800,000 on a £2.3m loan.