Cross-party MPs hit out at FCA interest rate swap review

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Cross-party MPs have hit out at the Financial Conduct Authority’s review into interest rate swap misselling for not including certain companies.

In a parliamentary debate on financial product misselling yesterday, Conservative MP for North Herefordshire Bill Wiggin said the FCA approach “flies in the face” of reason and the compensation scheme should be extended.

Last June, HSBC, Barlcays, Lloyds Banking Group and the Royal Bank of Scotland agreed to pay redress to an estimated 40,000 small and medium sized businesses missold interest rate swaps.

The FSA began a full review in January, including six more banks, but excluded firms based on a test of whether they are large enough to understand the risks. 

Wiggins said sophistication cannot be determined by size and the FSA has created its own definition of an SME.

He said: “I would like to see justice for all companies, irrespective of their number of employees or the size of their turnover. As a former banker, I know that the degree of sophistication needed to understand these complex products is extremely high.

“If companies were not properly educated on the deals they were doing, why should the FSA pick one particular group to protect?”

Liberal Democrat MP for Wells Tessa Munt agreed the scheme should be extended to give SMEs the “best possible assistance” to escape “appalling agreements”.

She also called for help with redress for firms that have gone into administration since the misselling took place, which are less likely to claim redress.

Treasury economic secretary Sajid Javid rejected the calls and said the FCA has found the right balance. He warned it could ”open the floodgates” to business claims if the scheme was extended to more firms.

He said: “We do not agree that all businesses should have access to the FCA review. Instead, there needs to be a defined cut-off point where more sophisticated businesses are able to take responsibility for understanding the products or services they are entering into.

“There will be organisations that took one of these product with a full understanding of the risks involved if interest rates changed, and it is not for the Government to perform due diligence for such large, sophisticated organisations.”