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By Huw Jones
LONDON, Feb 10 (Reuters) - A scheme for compensatingcompanies mis-sold complex products by banks to shield againstinterest rate hikes is skewed in favour of the lenders, Britishlawmakers said on Tuesday.
The scheme was set up by the Financial Conduct Authority torequire banks such as Lloyds, Barclays, RBS and HSBC to compensate thousands of smallcompanies that were mis-sold products known as interest rateswaps.
Rather than acting as an insurance policy, companies thatbought the swaps were forced to pay extra charges when interestrates actually fell to record lows, leaving some facing ruin.
"My concern is that having been done over once by the banks,there is a grave risk here that a number of small businesses aregoing to be done over a second time in redress or compensationarrangements," said Andrew Tyrie, chairman of parliament'sTreasury Select Committee.
His committee was questioning Martin Wheatley, chiefexecutive of the FCA.
Mark Garnier, another member of the committee, said theredress scheme was not giving "fair justice" and showed that theFCA had succumbed to the banks by fashioning a scheme that was"detrimental" to customers.
"You have created a scheme whereby it's the banks that makethe decision as to what documentation goes to the independentreviewer," Garnier said.
Wheatley said he was confident the redress scheme wasindependent, reasonable and fair, with 14,000 of 17,000 eligiblecustomers having already settled and receiving 1.8 billionpounds ($2.7 billion) .
"For the vast majority, people did get what the scheme setout to do, which is to get their money back quicker than anyother scheme would have achieved," he added.
Wheatley said no bank has faced enforcement action for anyfailure to implement the redress scheme and he was satisfied thebanks, who have set aside 4.4 billion pounds to meet potentialcompensation claims, have acted properly.
The committee will comment on the redress scheme in itsforthcoming report on lending to small and medium sizedcompanies.
($1 = 0.6566 pounds) (Reporting by Huw Jones; Editing by Keith Weir)
