- 11 Banks are participating in the FCA Review
- ‘Non-sophisticated’ customers are eligible to have Structured Collars, Collars and Swaps reviewed; caps can be reviewed upon request
- Redress is not guaranteed
- The Review process is beneficial to affected customers, but is not straightforward or simple for those acting alone
The Financial Services Authority (FSA), now the Financial Conduct Authority (FCA), announced in the summer of 2012 that it had discovered “serious failings” in the way Interest Rate Hedging Products were sold, including inappropriate selling techniques and banks offering excessive sales incentives to their staff to aggressively sell these products. The FCA agreed to review Interest Rate Hedging Products that may have been mis-sold on or after 1 December 2001 to ‘non-sophisticated’ customers. The FCA agreed with the banks a test for assessing whether customers are sophisticated or non-sophisticated. On 29 June 2012 the FCA reached an agreement for the 4 major UK Banks to participate in the Review process and to provide adequate redress where mis-selling has occurred. On 23 July 2012, the FCA announced that 7 other Banks had agreed to review their sales of Interest Rate Hedging Products. The participating Banks are as follows:
- Allied Irish Bank (UK);
- Bank of Ireland;
- Clydesdale and Yorkshire banks (part of the National Australia Group (Europe));
- Co-operative Bank;
- Northern Bank;
- Santander UK; and
- Irish Bank Resolution Corporation (IBRC), formerly Anglo Irish Bank and Irish Nationwide Building Society, also agreed to review their sales from their UK branches.
Northern Bank later announced that it had not sold any Interest Rate Hedging Products to customers eligible for the Review. The first step of the process was a pilot review where the FCA monitored 173 sales to ‘non-sophisticated’ customers across 8 Banks. An additional 133 cases were looked at to assess the application of the sophistication test. The pilot findings were announced on 31 January 2013 and found that over 90% of the sales did not comply with one or more of the regulatory requirements. It is noted however that the FCA primarily reviewed the most complex of Interest Rate Hedging Products known as structured collars. It therefore remains to be seen what percentage of all Interest Rate Hedging Products will be determined to have been mis-sold.
By 14 February 2013, Barclays, HSBC, Lloyds, RBS, Allied Irish Bank, Bank of Ireland, Clydesdale and Yorkshire banks, Co-operative Bank and Santander agreed to conduct their Review of Interest Rate Hedging Products in line with the principles set out in the FCA’s pilot findings.
The banks have agreed to:
- review the sales of Interest Rate Hedging Products, to include Structured Collars, Collars and Swaps, to non-sophisticated customers to determine whether redress is due; and
- review the sale of caps to non-sophisticated customers to determine whether redress is due if a complaint is made by the customer during the Review
If you have been sold an Interest Rate Swap or other Interest Rate Hedging Product, we can help you determine whether or not you meet the FCA sophistication criteria and which route of redress would be your best option.
We advise eligible businesses for the FCA Review to take advice on their claim to ensure that the full extent of the potential mis-sell is accounted for. For more information about why we recommend seeking advice, please see our ‘Can I Claim?’ section.