Addressing a crowd outside Parliament, Sajid Javid, the minister in charge of relations with the financial service industry said that the Financial Conduct Authority (FCA) and the big banks need to “get on with the job” of compensating small firms, many of whom have been caused undue stress while they wait.
Mis-selling of interest rate swap derivatives was the subject of a backbench business debate lasting three hours yesterday (October 24) in which many MPs gave accounts of constituents affected by the scandal and agreed that the redress scheme set up by the FCA was "unacceptable".
Under the terms of the scheme, the deals were meant to give borrowers security against rising interest rates but with rates at an historic low many businesses saw their payments soar.
Meanwhile, a redress scheme set up by the FCA to review 30,000 cases in July 2012 has resulted in only 32 businesses receiving compensation to date, at a cost to the banks of £2m, despite the fact that around 93 per cent of businesses that took on an interest rate hedging product are estimated to have been mis-sold one.
The delays have left many businesses struggling to cling on, as they grapple with payments to the banks that are much higher than they expected, while others have failed under the weight of money they owe.
However, shortly before the debate, two of the country’s largest banks, HSBC and the Royal Bank of Scotland, gave unconditional assurances that customers who had been mis-sold interest rate hedging products would be offered compensation without being forced to accept a deal on any separate claims for damages.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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