Interest Rate Swap Derivatives

Martin Vickers Excerpts

Thursday 24th October 2013 Commons Chamber

[Martin Vickers (Cleethorpes) (Con)]

I, too, praise my hon. Friend the Member for Aberconwy (Guto Bebb) for securing this debate and leading the campaign, and like the previous speaker, my hon. Friend the Member for Bury North (Mr Nuttall), I wish to highlight one or two particular cases that constituents have brought to my attention. So often in this place we discuss issues that are difficult for individuals to relate to, but on this occasion I—like many other Members—have constituents in the Gallery whose businesses have been practically destroyed by the actions of the banks they trusted.

I have received only three complaints from individual constituents about this scandal, but it is fair to assume that since there are tens of thousands of such cases across the country, many are perhaps suffering in silence. I suspect that just as in the cases brought to my attention, people trusted their banks and regarded them as one of their financial advisers, who would advise on the best course of action for their business. People were not so naive as to assume that the bank was not benefiting in some way, but it is fair to say that they assumed that, irrespective of any commissions paid, they were at least being sold a product that would be advantageous to their business.

I will quote from the statement of one specific case:

“We are just two working class families…we trusted our bank, and thought they were looking after our business interests. We, like other small SMEs were misled and lied to by the bank. The bank basically cornered us into taking out swaps, we didn’t have a choice, and as we trusted them, we took the products. The swaps were not properly explained to us, we were not told how they fully worked and were not told about the huge exit costs….We should never have been sold these products, they were not appropriate to our business...Financially this has crippled our business, and the knock on effect is we can’t employ…people like we used to...Several times we tried to talk to the bank about these products, but each time they shut the door in our face…We are in the redress scheme, but…the banks are playing a game and dragging their heels.”

That certainly seems to be the story we are hearing from other colleagues in the debate.

My constituents go on to say that they moved banks because the bank

“wanted to sell us their life policy cover (at £550 per person, per month), which we insisted we did not need…We were confident now that we had a great knowledgeable team working with us”.

They are referring to their solicitor, accountant and banker, whom they trusted as they assumed that the bank had the best interests of their business at heart. The statement continued:

“Our banking relationship manager…discussed with us a hedging product that the bank said we needed…We trusted the bank, and decided we had no choice but to continue and enter into hedging arrangements. We were not looking for any different type of lending, we have always borrowed money on standard terms…The only reason we entered into the swaps was because our bank manager said it was a condition to any future lending, that we must have these swaps…We do feel betrayed by the Bank, we had trusted them and worked with them for a number of years…We have kept our commitments…the bank does not realise what we have had to do to honour our payments. It’s been very, very tough….We just need the bank to do the right thing now.”

I hope that when the Minister sums up he is able to give some assurance to my constituents that he will do everything possible to ensure that the redress scheme is dealt with and pays out as quickly as possible. Understandably, people are writing to me and to other Members to ask how much longer they will have to wait. We hear many stories of banks crippling and ruining companies, and we cannot go on like this. We have regulators, yet we have another scandal that should have been prevented. Were the regulators asleep on the job? Those caught up in this and other scandals trusted their banks. Trust in the relationship between banks and their customers is a prerequisite. Clearly, there has been no trust in this case. Many constituents have been let down and we must not let it happen again.