Watchdog warns banks have dodged small firms’ swaps mis-selling probe

Tim Wallace
Follow Tim
BANKS may have embedded interest rate swaps within other products, harming small business customers in exactly the same way as those who were mis-sold the swaps as standalone products, the City’s top watchdog has warned.

In a letter sent to the Treasury earlier this year but only revealed yesterday, Financial Conduct Authority boss Martin Wheatley said the problem may be twice as large as previously thought.

The regulator has reviewed the standalone interest rate swaps, looking at 40,000 of the deals and forcing banks to pay compensation in cases where they were mis-sold to unsophisticated small businesses.

But Wheatley’s letter shows worries that the biggest banks may have sold up to 60,000 of the products embedded within other loans, avoiding the watchdog’s review.

“As they are commercial loans, these products are not regulated,” Wheatley wrote to minister Greg Clark.

“We have concerns that firms may seek to take greater advantage of the limits to our regulatory remit in future.”