Interest Rate Swap Agreements Comment
The Financial Services Authority has given the go-ahead for a compensation scheme targeted at small businesses which were mis-sold “absurdly complex financial products".
The compensation scheme, for small and medium sized businesses, concerns the mis-selling of Interest Rate Swap Agreements (“IRSAs”). Insiders at the banks believe the compensation bill could now reach Â£1.5bn, against Â£630m currently put aside by lenders to meet the cost of claims.
This latest news comes on the back of reports that the same businesses are being squeezed by the big banks as they refuse to pass on to business customers the benefits of their ultra-cheap funding costs. In fact, interest rates on loans to small British businesses actually rose last month.
Laura Willoughby MBE, Chief Executive of Move Your Money said:
"This is yet another example of the big banks contempt for their customers. In the lead-up to the financial crisis, many small businesses were told they had to buy these complex products if they wanted a loan from their bank, despite the fact that they neither understood nor needed them.
"Many of the banks flogging interest rate swaps were also manipulating Libor, the very rate on which the swap was based. The banks were forcing small businesses to gamble, having already loaded the dice.
"Now banks are also failing to pass on Government funding to support them as the economy struggles to recover. Despite public concern the big banks are not changing their bad behaviour. Businesses and individuals all need to send a strong signal that enough is enough and move their money."