Last week the FSA stated that banks had mis-sold around 90% of rate swaps. Martin Wheatley, chief executive designate of the Financial Conduct Authority stated:
"We believe that our work will ensure a fair and reasonable outcome for small and unsophisticated businesses."Was this statement an indication of a new tough approach by the FSA against mis-selling by the banks?
Unfortunately, for the hapless SME's who were sold these products, the answer is no.
The Independent reports that banks have been given a "get out of jail card" by the FSA, in the form of a ceiling on the size of swaps for which compensation can be claimed. What the FSA chose to hide in their statement last week was the fact that swaps of £10M and above will be excluded from the review that it has ordered banks to undertake, this exclusion will mean that banks will be exempted from compensating companies that took swaps of £10M or more out.
Aside from the fact that the FSA has yet again proved that it is weak and toothless when pressured by the banks, this exemption is a clear indication that banks are in a weak financial position (ie the industry cannot afford to take another £10BN hit akin to the PPI scandal).
The sooner the FSA is expunged from history, the better!
