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 after a series of failings were uncovered.
The watchdog said the announcement means that these banks have agreed to work on reviewing individual sales and providing redress to customers based on principles outlined in today’s FSA report, and overseen by independent reviewers.
The decision follows intensive work by the FSA to scrutinise the pilot review of sales carried out by the banks and the independent reviewers. It confirmed the FSA's initial findings of mis-selling .
The FSA looked at 173 sales to non sophisticated customers and found that more than 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: “This marks significant progress in our review of these products. We believe that our work will ensure a fair and reasonable outcome for small and unsophisticated businesses.
“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.
"But it is important to remember that this review is firmly focused on the particular circumstances of each sale. These will determine whether there were failings in the sales process and, if so, whether redress is due.”
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. The FSA aims to be able to confirm that these banks can launch their reviews by 14 February.
It said customers of all these banks will be directly contacted by the banks and will not need to involve other advisers.
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