FCA regulation of interest rate hedging products: one rule for some?

This article by Toby Riley-Smith was first published in the Butterworths’ Journal of International Banking and Finance Law.

A significant lacuna in the regulation of financial services has been highlighted recently by the House of Commons Treasury Select Committee’s review of conduct and competition of lending to small and medium sized businesses (SMEs).

Although the FCA has the power to regulate standalone interest rate hedging products, it has confirmed in evidence to the Committee that it has no power to act in relation to business loans in which such interest-rate swaps were “embedded”.

Whilst it has been able to force some of the banks to set up and implement compensation to customers with standalone IRHPs in appropriate cases, it has therefore been unable to offer any similar redress to the thousands of small and medium sized businesses who complain that they have been mis-sold such loans.

This article forms part of an ongoing series being written by members of the Henderson Chambers Banking Finance and Consumer Credit group for the Butterworths’ Journal of International Banking and Finance Law

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