SEVEN more banks will review their sales of hedging products to small companies, the Financial Services Authority announced yesterday, joining the four major institutions which have already pledged to compensate customers for any mis-selling.
Around 28,000 interest rate hedging products were sold from 2001 to date, with the latest seven banks representing around 10 per cent of those.
An FSA investigation found evidence of mis-selling, with bank staff pushing unsophisticated customers to buy complex products without fully understanding the risks, driven by short-term rewards and incentives.
Some customers were not fully aware of exit costs, inappropriately given advice, and sold products which did not match the duration and amount of the underlying loan, the FSA believes.
These latest banks’ sales have not yet been examined and so no mis-selling has been found by regulators, but the FSA says it wants to show that customers at all banks are treated consistently.
The latest banks are: Santander UK, the Co-op, Allied Irish Bank, Bank of Ireland, Clydesdale and Yorkshire banks (part of the National Australia Group), and Northern Bank.
They join Lloyds, Barclays, HSBC and RBS, which were already taking part in the review.
Santander has revealed it has identified three “non-sophisticated” customers who purchased the controversial structured collar products, and it has agreed to address their situation. It is also reviewing the sale of other interest rate management products to around 200 unsophisticated customers.
The Co-op said it does not sell structured collars, but does sell basic hedging products.
The Clydesdale and Yorkshire banks and Bank of Ireland said they are ready to cooperate fully with the FSA, while the other banks were unavailable for comment.