Interest Rate Swap Derivatives

Mark Tami Excerpts

Thursday 24th October 2013 Commons Chamber

[Guto Bebb (Aberconwy) (Con)]

I beg to move,

That this House considers the lack of progress made by banks and the Financial Conduct Authority on the redress scheme adopted as a result of the mis-selling of complex interest rate derivatives to small and medium businesses to be unacceptable; and notes that this lack of progress is costly and has caused further undue distress to the businesses involved.

I am surprised to be back here 15 months after the first debate on this important issue. I appreciate the Backbench Business Committee—the Chair is in her place—once again offering time to debate it. The first debate made a significant difference. Prior to that debate, the Financial Conduct Authority and the banking sector were refusing to acknowledge that there was an issue that needed to be dealt with. A few days after the first debate, that changed and a pilot scheme was announced.

Members who have followed this issue carefully are aware that the pilot scheme found that approximately 91% of cases investigated between July 2012 and January 2013 had a technical mis-selling, so the process has highlighted the mis-selling of these products. The House should take some comfort in knowing that securing the second debate has also resulted in a significant concession from the banking sector. Members of the all-party group on interest rate mis-selling have argued long and hard that the redress scheme had a central flaw, which is that the technical redress for the mis-selling of interest rate swap derivatives and the consequential losses were linked within the redress scheme. That gave the banks in question a significant advantage, because small businesses facing heavy cash-flow problems were inclined perhaps, under the scheme as it stood, to accept an offer of technical redress without fighting hard over consequential losses, simply because they were desperate for the cash.

As a result of the announcement of this debate last week, HSBC said on Tuesday that it was separating the technical redress from the consequential losses, and other banks have followed. My first call today, therefore, is for the rest of the banks involved in the redress scheme to follow HSBC’s and RBS’s lead. It is several months too late, perhaps, but it is the right decision, and we want to see the other banks following.

[Mark Tami (Alyn and Deeside) (Lab)]

Does the hon. Gentleman agree that the FCA is still dragging its feet and that this has gone on for far too long? I am helping Ged Fitzpatrick, who has a care home in north Wales and who recently suffered a heart attack. I am sure that that had something to do with the stress of this process, which has gone on for far too long.

[Guto Bebb]

Bully-Banks surveyed its members and found that the health impact on them had been significant. I accept that the FCA still has ground to make up, but despite its stating in September that linking both payments was the right thing to do, I am pleased that yesterday it welcomed the decision to separate them. I would rather see a sinner repent, even late in the day, than no changes whatsoever.

--- Later in debate ---

[Natascha Engel]

I could not agree more. I do not know whether other Members have received a letter from Barclays today outlining, in not very easy-to-understand English, what it is doing and proudly proclaiming how “tightly controlled” and “heavily scrutinised” the review is

“whereby all the banks involved are required to develop a detailed methodology for agreement”,

blah, blah, blah. It goes on and on and on. If this is phrased in anything like the same way as the products individuals were sold, I am not surprised they did not understand what was going on.

[Mark Tami]

My hon. Friend talks about sanctions. A lot of these people were tricked at the last minute, whereby they were about to sign the loan and this clause was put in. They were told, “Oh no, it is an added safety for you.” Nothing was explained the other way and these people are now paying the price, but the real people who should pay the price are the banks that tricked them in the first place.

[Natascha Engel]

Not only was this a trick, but some individuals were not able to take loans unless they bought these products—that was the real scandal. The other tragedy has been: the many individuals who have taken their lives; those whose lives have been ruined; those whose marriages have broken up; and those individuals whose businesses have gone bust. What happens to them under any redress scheme? Those are the sorts of individuals that Bully-Banks has done a very big job to support, and I hope that today’s debate will mean that if the FCA is listening and if the banks are listening, they will do something about these people, and quickly.