By Huw Jones
LONDON, Jan 17 (Reuters) - Lawmakers are pursuing a judicial
review of a decision not to widen a British redress scheme for
businesses that were missold interest rate 'hedging' products,
saying that this had allowed banks to reduce compensation
payouts by 10 billion pounds.
Thousands of small businesses received 2.2 billion pounds
($3 billion) from nine banks, including HSBC, Barclays, Lloyds
and Royal Bank of Scotland under the redress scheme, which was
set up nearly a decade ago for products missold from 2001.
But an independent review said last month https://www.reuters.com/world/uk/uk-financial-watchdog-vows-be-faster-more-open-with-redress-schemes-2021-12-14/#:~:text=LONDON%2C%20Dec%2014%20(Reuters),lawyer%20of%20the%20regulator
's%20actions that excluding about 10,000 sales of the products,
which were supposed to protect businesses from rising interest
rates, from the scheme, a third of the total, was an "inadequate
regulatory response".
When rates fell, companies who bought the products found
they had to pay crippling extra charges, often running to tens
of thousands of pounds.
The review said that the FCA, after representations from
some banks, agreed to exclude "sophisticated" customers, defined
as businesses having two of three characteristics of a turnover
of more than 6.5 million pounds, a balance sheet of more than
3.26 million pounds or more than 50 employees, from the scheme.
There was no explanation why the change was agreed by the
regulator, the review said.
"The regulator cannot produce any evidence to support the
decision or even remember what the reasons were for excluding so
many victims. Meanwhile they cleared the way for banks to knock
up to 10 billion pounds off their compensation bill," Kevin
Hollinrake, who co-chairs the All-Party Parliamentary Group on
fair business banking said in a statement on Monday.
The group said that it had called on FCA CEO Nikhil Rathi to
reconsider after the watchdog said in December that further
action would not be appropriate or proportionate.
It said it was now filing an application for a judicial
review, which refers to a judge reviewing the legitimacy of
decisions taken by a public body.
An spokesperson for the FCA said it was a very different
organisation from the one that existed when the products were
sold and when the voluntary redress scheme was established.
"We have accepted many of the recommendations from the
independent review," the spokesperson added.
($1 = 0.7311 pounds)
(Reporting by Huw Jones; Editing by Alexander Smith)