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Treasury pressure for FSA to ‘water down’ interest rate swap redress

Treasury 480

Senior officials within the Treasury want the FSA to ‘water down’ findings of the regulator’s review into banks’ misselling of interest rate swaps to small and medium sized businesses, according to reports.

The Sunday Telegraph reports Government concern that the fall out of the swaps scandal could be too damaging to banks’ balance sheets and that pressure is being applied on the FSA before it publishes findings of a pilot scheme to provide redress to affected parties.

The pilot scheme was agreed after the FSA found “serious” failings in the way the products were sold. The pilot has analysed around 200 cases of misselling.

The paper says camps are split within the Government between those who want full compensation and others who fear it would “cost too much and blow a hole in banks’ balance sheets”.

FSA estimates say around 40,000 small and medium sized businesses were sold interest rate swaps by their banks.

A Treasury spokesman told the paper: “The Government has been clear that the misselling of financial products is wrong, and supports the FSA’s ongoing work on this issue. It is vital to establish redress as quickly as possible for those business that were missold.”

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