Business demands action as FSA reveals scale of interest-rate swap scandal
31 Jan 2013
A leading business group is calling for action from the banks after the Financial Services Authority (FSA) revealed that more than 90% of interest-rate swaps were allegedly mis-sold to small firms.
In June 2012 four of the UK’s main high street banks were accused of mis-selling interest rate protection products, which are designed to protect businesses taking out loans, in the event of interest rate rises.
The Federation of Small Businesses (FSB) welcomed the FSA’s decision to revise the criteria for businesses looking to pursue a possible redress, however, it warned that banks need to take ‘swift and decisive action’ to compensate the businesses caught up in the scandal.
The FSA estimates that over 90% of the 173 cases studied will result in compensation being due to the customer.
Commenting, the FSB’s National Chairman, John Walker, said: ‘The FSA's report into mis-selling highlights the seriousness of the situation finding that 90% of loans were mis-sold. This is alarming, but will come as a relief to the thousands of small firms who have been anxiously waiting for an outcome on this very complex situation.’
He continued: ‘However with the pilot showing such a significant level of mis-selling we are concerned that the FSA has not mandated that all payments are suspended when a firm enters into the scheme – we would like the banks to do this for their customers.
There is also a lack of clarity on what full redress looks like, with banks determining what constitutes consequential losses, and how an appeals process will work.’
Barclays, HSBC, Lloyds and RBS will now review individual sales dating back to 2001, which could result in millions of pounds being paid in compensation to small businesses.