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FCA Review

About the Financial Conduct Authority (FCA) review into Interest Rate Swaps.

From 2012 onwards the Financial Services Authority (FSA) began looking at the sale of Interest Rate Hedging Products (IRHPs, also known as Interest Rate Swaps) to small and medium sized businesses. The FSA has since been split into two separate organisations, and the Financial Conduct Authority (FCA) is now responsible for the IRHP review.

In June 2013 the FCA published the results of a pilot study into the sale of IHRPs. This study found that up to 93% of IRHPs may have been mis-sold.

The review process

The FCA ordered the banks to carry out a review of all swaps sold since 1 December 2001. The review steps are:

  1. The bank will categorise each customer according to whether they are ‘sophisticated’ or ‘non-sophisticated’. Only ‘non-sophisticated’ customers will be included in the FCA review (see our article on the sophistication test).
  2. If the bank assesses the customer as ‘non-sophisticated’ they will invite the customer to opt in to the review.
  3. If the customer opts in, they will be invited to attend a fact-finding meeting (see our article on the fact-finding meeting).
  4. The bank will review the sale for compliance. The FCA have already deemed structured collars sold to non-sophisticated customers as non-compliant, so these will go straight to the redress stage. 
  5. If the sale was assessed as non-compliant, the bank will offer redress. This may not mean the return of all payments made on the product. The bank should make an offer which puts the customer back into the position they would be in if the non-compliance had not occurred. If the service the customer was offered had been compliant, they may have opted for an alternative product which may have suited them better, so the bank is entitled to offer such an alternative product and restrict financial redress to any difference in the cost between this and the original product.


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