Interest rate swaps were marketed aggressively to small businesses by banks including Barclays and RBSGary Streeter, the Conservative MP for South West Devon, has lambasted the Financial Conduct Authority (FCA) for failing to take a strong enough stance on the mis-selling of financial products to small firms.
In a debate in parliament on the Bank of England and Financial Services bill on 1 February, Streeter blasted the regulator as “weak, toothless and anaemic” for not offering enough support to SMEs inappropriately sold Interest rate swap agreement (IRSA) products.
The financial instruments – which protect buyers against increased costs when interest rates rise, but cause them to suffer financially when they are lowered – were marketed aggressively to small businesses by banks including Barclays and RBS from 2001 to 2008, with many lenders making the purchase of IRSAs a condition of providing finance.
Streeter highlighted the plight of an SME family business in his constituency that was forced into administration because of being sold such a product, and criticised the FCA for excluding some small firms deemed “sophisticated” from a compensation scheme for victims.
He explained: “The family behind that constituency company were brilliant at buying old commercial premises and converting them into small units to let on flexible terms to small businesses – the very thing we want to encourage in our economy – but they had no understanding of complex financial instruments.
“When they first asked me to help some years ago, it took me, with my brilliant first-class degree in law – I knew I should say that, as nobody else would – and 15 years’ experience as a corporate lawyer, days to get my head around the swap they had been sold, which was completely inappropriate for their business. How on earth were they supposed to understand it?
“But because they were, ludicrously, deemed ‘sophisticated borrowers’, they were excluded from the FCA scheme and are having to resort to litigation to get justice. I believe they will win and win heavily, but it should not be necessary and it sickens me that RBS is defending this litigation with taxpayers’ money—that just does not seem right at all.”
Other politicians also criticised the regulator for the levels of bureaucracy imposed on small firms, with regulation and compliance requirements leading Suffolk Conservative MP James Cartlidge to slam the body as a “box-ticker”.
Some 17,000 eligible British small businesses have sought compensation through the FCA scheme – and in 2013 the regulator put pressure on banks to speed up claims processes for affected small firms. In 2015 the FCA’s chief executive Martin Wheatley defended the scheme as “reasonable and fair.”
To find out more about the politicians speaking up for small firms, check out our list of Small Business Decision Makers http://businessadvice.co.uk/finance/fca-blasted-as-weak-toothless-and-anaemic-for-failing-small-businsses-over-mis-selling-of-financial-products/
In a debate in parliament on the Bank of England and Financial Services bill on 1 February, Streeter blasted the regulator as “weak, toothless and anaemic” for not offering enough support to SMEs inappropriately sold Interest rate swap agreement (IRSA) products.
The financial instruments – which protect buyers against increased costs when interest rates rise, but cause them to suffer financially when they are lowered – were marketed aggressively to small businesses by banks including Barclays and RBS from 2001 to 2008, with many lenders making the purchase of IRSAs a condition of providing finance.
Streeter highlighted the plight of an SME family business in his constituency that was forced into administration because of being sold such a product, and criticised the FCA for excluding some small firms deemed “sophisticated” from a compensation scheme for victims.
He explained: “The family behind that constituency company were brilliant at buying old commercial premises and converting them into small units to let on flexible terms to small businesses – the very thing we want to encourage in our economy – but they had no understanding of complex financial instruments.
“When they first asked me to help some years ago, it took me, with my brilliant first-class degree in law – I knew I should say that, as nobody else would – and 15 years’ experience as a corporate lawyer, days to get my head around the swap they had been sold, which was completely inappropriate for their business. How on earth were they supposed to understand it?
“But because they were, ludicrously, deemed ‘sophisticated borrowers’, they were excluded from the FCA scheme and are having to resort to litigation to get justice. I believe they will win and win heavily, but it should not be necessary and it sickens me that RBS is defending this litigation with taxpayers’ money—that just does not seem right at all.”
Other politicians also criticised the regulator for the levels of bureaucracy imposed on small firms, with regulation and compliance requirements leading Suffolk Conservative MP James Cartlidge to slam the body as a “box-ticker”.
Some 17,000 eligible British small businesses have sought compensation through the FCA scheme – and in 2013 the regulator put pressure on banks to speed up claims processes for affected small firms. In 2015 the FCA’s chief executive Martin Wheatley defended the scheme as “reasonable and fair.”
To find out more about the politicians speaking up for small firms, check out our list of Small Business Decision Makers http://businessadvice.co.uk/finance/fca-blasted-as-weak-toothless-and-anaemic-for-failing-small-businsses-over-mis-selling-of-financial-products/
