The Financial Services Authority or FSA has confirmed that Barclays, HSBC, Lloyds and RBS would begin the full review of their sales of interest rate hedging products or IRHPs to small businesses.
This 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 work on the pilot has confirmed the FSA's initial findings of mis-selling of IRHPs.
The FSA said that its analysis of 173 sales of IRHPs to non sophisticated customers by Britain's four largest banks found that more than 90% of the sales did not comply with at least one or more regulatory requirement, and a significant proportion of these 173 cases may result in redress being due to the customer.
During June of last year, the FSA reported that it had found serious failings in IRHPs' sale. Today's announcement indicates that these banks would work on reviewing individual sales and providing redress to customers based on principles outlined in today's FSA report, and overseen by independent reviewers.
In addition, the FSA is 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 February 14th.
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