FSA draws seven more banks into interest rate probe

Thursday 26th July 2012

The FSA has widened its investigation into the sale of interest rate hedging products to small and medium-sized businesses.

Seven additional banks – Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire banks (part of the National Australia Group (Europe)), Co-operative Bank, Northern Bank and Santander UK – could now potentially be landed with large compensation bills.

All have confirmed that they will participate in the review of their sales of these products and the redress exercise, on the same basis as those larger banks which signed the agreement that was announced on June 29.   

The seven banks have a small proportion (around 10%) of the overall interest rate hedging product sales in the UK. 

The FSA has not examined their sales of interest rate hedging products and so has not made any finding of mis-selling, but in agreeing to join the review, the FSA says they are ensuring that customers who bought these products will be treated consistently, irrespective of who they bank with. 

There are now 11 banks signed up to the review.

The FSA has now agreed with the four larger banks the terms of reference for their independent reviewers. These include giving each customer the right to have an independent reviewer present during any meetings or calls with the bank. The FSA said it expects these banks to proceed rapidly with their reviews. 

Clive Adamson, director of supervision in the Conduct Business Unit, said: “This is a major exercise but one that we hope will ensure even more businesses benefit from having their individual situation reviewed.”

He said he was pleased that seven more banks had agreed to the review, saying: “Although the number of their sales was smaller and while there is no presumption that mis-selling has occurred, it shows their willingness to do the right thing.”