The Financial Services Authority (FSA) has confirmed that Barclays, HSBC, Lloyds and RBS will start the full review of their sales of interest rate hedging products (IRHPs) to small businesses. In June last year, the FSA announced that it had found serious failings in the sale of IRHPs. The announcement means that these banks have agreed to work on reviewing individual sales and providing redress to customers.
The decision follows intensive work by the FSA to scrutinise the pilot review of sales carried out by the banks and the independent reviewers. The pilot was established to allow the FSA to consider the banks’ proposed approaches to reviewing sales and to ensure they would deliver the right outcome for customers.
The pilot work confirmed the FSA’s initial findings of mis-selling of IRHPs. The FSA looked at 173 sales to non sophisticated customers and found that over 90% of the sales did not comply with at least one or more regulatory requirement. A significant proportion of these 173 cases are likely to result in redress being due to the customer. However, the small number of typically more complex cases in the sample may not be representative of all IRHP sales.
Martin Wheatley, CEO designate of the Financial Conduct Authority, said: “Small businesses will now see the result of the review as the banks look at their individual cases. Where redress is due, businesses will be put back into the position they should have been without the mis-sale.”
The FSA has also been reviewing sales of IRHPs by Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire banks, Co-Operative Bank, and Santander UK.