Interest Rate Swap Products

Debate between Glyn Davies and Emma Reynolds

Thursday 21st June 2012 Commons Chamber

[Emma Reynolds (Wolverhampton North East) (Lab)]

I, too, would like to applaud the hon. Member for Aberconwy (Guto Bebb) for delivering such a fantastic speech. I want to tell the House about a similar case in my constituency. It is the case of Guardian Care Homes, and it has already been mentioned by my right hon. Friend the Member for Wentworth and Dearne (John Healey). The company’s headquarters are in my constituency, but it employs about 900 staff in 30 care homes across the country. Small and medium-sized enterprises such as these need to be supported, rather than exploited.

I recently met members of the senior management at Guardian Care Homes, and I was shocked by what they told me. In 2007, they were sold two interest rate swap products, which were taken out against existing loans that had been taken out to improve the business model and to improve the care homes. They also said that the bank that sold them the products told them that this was a condition of getting the original loans, and that the products would protect them against interest rate rises. They were not informed of the dangers and financial implications of interest rate falls, however. According to Guardian Care Homes, the bank did not at any point during the sale of those swaps fulfil its obligation to explain that such costs could be incurred.

Guardian Care Homes also discovered that the swaps that had been sold to them vastly exceeded the original terms of the loans, by 10 and 15 years respectively, which made things incredibly difficult for the company in the long term. An independent study of this specific case recently described the bank’s behaviour as reckless, and a complaint has been made against the bank. It beggars belief that banks were requiring SMEs to take these products alongside loans, and I look forward to hearing the Minister’s response to these points today.

Even if the case involving the company in my constituency had been a one-off, it would have been extremely worrying, but there appear to be hundreds, if not thousands, of SMEs in the same situation. I am sure that we shall hear of cases in other right hon. and hon. Members’ constituencies later. Anecdotal evidence from SMEs suggests that, in many cases, swaps were bought without the companies having received any legal advice on their nature. The banks have a duty when selling financial products to ensure that the products and the risks involved are identified to businesses, and that there should be no coercion involved. I have written to the bank in question and requested that no punitive measures be taken against the company in my constituency while the complaint is ongoing.

[Glyn Davies]

The scale of this problem is far greater than we are being told. I have two examples in which the people I have spoken to are not going to take action. They have other clients and they are afraid to take action because they fear that they will be punished and that future relationships could be damaged. This is a huge problem, and we are seeing only part of it.

[Emma Reynolds]

I totally agree with the hon. Gentleman. I would very much like to hear from the Minister today whether the Government have a grasp of the scale of the problem, as it is certainly significant.

European Union

Debate between Glyn Davies and Emma Reynolds

Tuesday 13th December 2011 Commons Chamber

[Glyn Davies (Montgomeryshire) (Con)]

I am trying hard to understand the Opposition’s position on this complicated issue, but that is incredibly difficult without knowing whether they would have taken an affirmative or negative stance. We want not clever words about whether they would have signed, but a yes or no.

[Emma Reynolds]

It is terribly complicated, because the Government have two positions rather than one. Some hon. Members want the UK to cut itself loose completely. They will be happy only when the UK leaves the largest single market in the world. The Government’s policies are already choking off the recovery and have made us more vulnerable to the eurozone crisis. Were our membership of the European Union also in doubt, the economic consequences would be devastating. In a recent written answer to my right hon. Friend the Member for Paisley and Renfrewshire South (Mr Alexander) about the economic benefits of the EU to Britain, the Foreign Secretary replied:

“European markets account for half of the UK's overall trade and foreign investments and as a result, around 3.5 million jobs in the UK are linked to the export of goods and services to the EU.”—[Official Report, 12 July 2011; Vol. 531, c. 256W.]

Isolation could also threaten foreign direct investment.