Interest Rate Swap Derivatives

Nia Griffith Excerpts

Thursday 24th October 2013 Commons Chamber

[Nia Griffith (Llanelli) (Lab)]

Thank you, Madam Deputy Speaker, for allowing me the opportunity to speak in this very important debate. I congratulate the hon. Member for Aberconwy (Guto Bebb) on the work he has done over the years and on bringing the matter to the House’s attention through this debate.

This issue affected successful businesses that were trying to expand and help create more jobs in the local economy. Some of the businesses that have visited me were successful and had excellent plans for expansion. The really sad thing is that during their negotiations to change or expand their loans, it was often the case, as my hon. Friend the Member for Alyn and Deeside (Mark Tami) has said, that they were told right at the very last minute that, unless they accepted this clause, the whole thing would be shelved and they would lose all the transactions and work they were about to undertake. That was significant for them, because it meant having to say yes or no to a very important loan.

I think that such businesses are intrinsically fearful of going to the banks, which is a real problem. The terms and conditions for small businesses have changed so much over the past few years that they are fearful that, if they explain their difficulties to a bank, they will suddenly be told that their terms and conditions for a loan will be changed again. That is a real disincentive. The key thing to remember is that these are people who genuinely are trying to do the right thing, but who are fearful—perhaps ashamed—because they did not know exactly what was going on in the first place, even though, as my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) has said, the people who sold them the scheme were incentivised to do so in an underhand way. Often they would not make it at all clear to the businesses exactly what they were entering into. We need to redouble our efforts and look in particular at why there are so many delays, because every delay means businesses raking up yet more debt.

[Mr McFadden]

On the sales culture, what does my hon. Friend have to say about the evidence that the Parliamentary Commission on Banking Standards received from the trade unions representing bank staff that said that, sometimes, if branch staff did not meet their sales targets, they would be taken aside, given special management and pressurised to sell more products over the next month or two in order to meet the targets on which their bonuses were based?

[Nia Griffith]

My right hon. Friend makes a valid point. I have met people who were put in that situation and who ended up leaving the bank because they found it so difficult and uncomfortable working in that sort of culture. That does not help small businesses, which want a decent banking system from which they can get decent advice and the loans they need.

The worry is that the Financial Conduct Authority and the banks are not doing things as speedily as they might and that there will be a distinct delay. We are all aware that the agreement was that an independent reviewer would look at each case and that that process would be overseen by the FSA. My hon. Friends the Members for Nottingham East (Chris Leslie) and for Chesterfield (Toby Perkins) wrote to the Chancellor over a year ago outlining what we wanted to happen. When the Financial Secretary sums up, will he tell us what progress has been made?

We want a clear message that there will be no adverse effect for people if they tell their bank that they think they may have been victims of this particular mis-selling. We also want a moratorium on the foreclosure of affected businesses by their banks. People are really worried that, if they start looking at the issue in detail and open the box, they might be forced to reschedule their loans in an unmanageable way and that they eventually might be foreclosed on by their banks. The Chancellor and the Business Secretary need to send a much stronger message to the FCA about how we want the banks to work.

As many Members have said, we want the quickest resolution possible, but time limits also need to be looked at. The problem is that businesses that signed up to these agreements back in 2006 and 2007 are now reaching the six-year limit, and they will find themselves in considerable difficulties if they do not get redress through the scheme and end up going to court. We need to look at the way in which complaints are handled and the time limit that is being allowed. Perhaps there could be movement on that issue.

In summary, this issue needs urgent attention. We need a much speedier resolution and people need to be treated properly and courteously by their banks. They should not have to be fearful of loans being rescheduled or of being thrown out of the frying pan into the fire, which is their real worry. Speed is of the essence, because these businesses provide jobs in our communities and if they go under, it could mean not one lost job, but many job losses. I urge the Financial Secretary to say what more the Government can do to put pressure on the FCA and the banks to ensure a speedy resolution.

--- Later in debate ---

[Mr Mark Williams]

We need to knock that on the head immediately, because there has been a concerted effort by the banks to target certain businesses. There is no need for people to be ashamed, and my hon. Friend is right that many more cases are coming to light.

Huw and Jackie Roberts of Minhafan Estates, a property development business in Aberystwyth, are in the midst of the review. They went through the “fact find” interview stage of the review six months ago and are still waiting to hear from the bank or the FCA.

I want to talk about the inadequacy and even dishonesty of the subject access requests. A sheep farmer who came to see me obtained his subject access request from Barclays, but it included presentation documents that he was alleged to have been shown at the time of sale, which he had never seen before. History can be rewritten. The fear is that, in some of these cases, history is being rewritten by the banks.

Why is the FCA advising customers that the scheme

“can deliver fair and reasonable redress without them needing to hire lawyers”?

Many of my constituents are on the brink and cannot afford to hire a lawyer, but why is the FCA saying that?

Like my hon. Friend the Member for Aberconwy, I want to talk about alternative products. What is wrong with this form of so-called redress is that the banks get to propose what would have happened if they had behaved better. Despite the banks admitting that they have breached regulatory requirements, they are being given a second chance through the promotion of alternative products, so they have a second bite of the proverbial cherry.

Yesterday, my hon. Friend the Member for Aberconwy said that the cost of the review was £200 million, and he then told us that it had gone up to £450 million. Despite it costing £450 million to set up the review, only £2 million has been paid out in redress.

[Nia Griffith]

Does the hon. Gentleman agree that, in certain agricultural communities, there is a huge capital intensive cost, which takes a long time to repay? That is a particular problem for some of our constituents.

[Mr Williams]

That is a particular problem. The hon. Lady does not need to be reminded how perilous the farming industry is these days; some businesses barely have the capacity to survive.

People who have been sold tailored business loans have no protection because of a mere technicality. They have no guarantee of fair treatment from the banks. Most of my constituents who have been affected by hedge mis-selling have been sold TBLs, although I hesitate to say that they were sold them, because some of them were not aware that they were being sold them. Most of my constituents who are affected are out in the cold, so I return to the question that I have asked Treasury Ministers and the FCA, although I have received inadequate responses. I question how the FCA decides to interpret its principle-based regulation. I am talking specifically about TBLs from the Clydesdale and Yorkshire banks.