IRSAs to bring more woe for banks
Jun 29 2012
Britain's banks will soon be embroiled in a fresh scandal over complex financial products which have landed small businesses with spiralling bills.
The Financial Services Authority (FSA) is expected to reveal that it has found evidence of mis-selling as part of a review into the way lenders pushed so-called interest rate swap arrangements (IRSAs).
IRSAs are complicated derivatives products that may have been sold as protection - or to act as a hedge - against a rise in interest rates without the customer fully grasping the downside risks. Some companies have claimed the rising fees required to service the product after interest rates fell in 2008 have forced them out of business.
The City watchdog is expected to confirm that banks are writing to customers who have taken an IRSA and an independent assessor will look at the most complicated cases and determine whether compensation should be paid.
The claims echo the payment protection insurance (PPI) scandal that emerged last year, costing banks billions of pounds, and come in the week Barclays was fined £290 million for manipulating interest rates.
Businesses have complained that IRSAs, which were designed to insure borrowers against steep rises in interest rates, left them swamped by huge penalties after interest rates were slashed to record lows in the wake of the financial crisis
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