Seven more banks review rate swaps
Two Irish banks are among a further seven that have agreed to review the sale of complex financial products to small businesses and compensate customers where evidence of mis-selling is uncovered, the UK's City watchdog has said.
Allied Irish Bank and Bank of Ireland - along with the Clydesdale and Yorkshire banks, the Co-operative Bank, Northern Bank and Santander UK - will review the sale of so-called interest rate swaps to small and medium enterprises (SMEs), the British 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 the UK arms of 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.
Clive Adamson, director of supervision in the FSA's Conduct Business Unit, said: "Although the number of their sales was smaller and while there is no presumption that mis-selling has occurred, it shows their willingness to do the right thing and ensure their customers who bought these products can be confident that they will be treated on an equal basis."
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.
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. However, both banks previously said the impact would not be "material".