Banks will review sale of financial products
Three of the main Northern Ireland banks have joined with four others in agreeing to review the sale of complex financial products to small businesses and compensate customers where there is evidence of mis-selling.
Allied Irish Bank, Bank of Ireland and Northern Bank have joined the Clydesdale and Yorkshire banks, the Co-operative Bank and Santander UK to review the sale of so-called interest rate swaps to small and medium enterprises (SMEs), the Financial Services Authority (FSA) said.
Interest rate swaps are complicated derivatives products that may have been sold as protection - or to act as a hedge - against a rise in interest rates without the customer fully grasping the downside risks.
The move comes after Barclays, HSBC, Lloyds and Royal Bank of Scotland agreed to compensate customers after the FSA found "serious failings" in the sale of swaps to SMEs.
The seven additional banks have a small proportion - around 10% - of the overall interest rate hedging product sales in the UK.
The FSA said it has not examined their sales of interest rate hedging products and so has not made any findings of mis-selling.
Business owners who were mis-sold interest rate swaps by the big four banks suffered "a difficult and distressing experience with many people's livelihoods affected", the FSA previously said.
The regulator spent two months reviewing the sale of interest rate hedging products, talking to more than 100 customers who came forward.
Poor sales tactics were uncovered including failing to provide sufficient information on the hefty exit costs involved, failure to gauge the customers' understanding of risk and found rewards and incentives were a driver of these practices.
A survey by Bully Banks, which has been set up by alleged victims of swap mis-selling, found nearly three quarters of its members claim to have been forced to buy a swap by their lending bank as a condition of their loan.
Northern Bank confirmed it was taking part in the review.
"A very small number of these products have been sold by Northern Bank and we are currently working with the FSA to identify and confirm if we have any transactions that fall within the scope of this review."
Lloyds Banking Group and Barclays report their interim results later this week and could reveal more details about the expected compensation bill for mis-sold swap claims.
Santander UK said it has identified three "non-sophisticated" customers who purchased a type of interest rate hedging product called a structured collar, with whom the bank has already agreed redress.