Eighteen members of a cross-party parliamentary group of MPs heard last week that the Financial Services Authority's review of interest rate swap mis-selling, due to report its findings before Christmas, will not make an announcement on the outcomes until 2013.
The results of the pilot scheme, run by the FSA in conjunction with the banks, looking to determine whether businesses had been mis-sold the sometimes complex financial products for about 50 sample cases, will not now be known until late January or early February.
The FSA estimates that 28,000 interest rate hedging products have been sold to businesses since 2001, with campaign group Bully Bank estimating that around 5,000 hospitality businesses are affected.
Members of the All Party Parliamentary Group on Interest Rate Swap Mis-Selling called for a moratorium of all swap payments with immediate effect and claimed the process was skewed in favour of the banks. So far the 11 banks involved in the review have only agreed to do this on a case-by-case basis.
APPG member, Steve Brine MP said: "Suspending swap payments is a positive step towards helping those most vulnerable small businesses who need immediate cashflow relief from swap payments in order to survive but there is an urgent need to suspend all swap payments pending the outcome of the review. It is important that businesses are able to function and to keep their employees in work whilst the FSA redress process takes its course, which is now taking longer than expected."
Commenting on the need for clarity on the net present value of swap contracts liabilities on bank balance sheets, Mark Garnier MP said: "It is the view of the FSA that two thirds of customers still have swap payment contracts outstanding, with payments crippling their businesses. We need to know what the net present value for all these products on the balance sheets of UK banks in order to understand the scale of the problem and the potential impact of an effective redress scheme on the finances of the banking sector."
Chairman of the APPG, Guto Bebb said: "It is disappointing that the pilot scheme hasn't been completed and reviewed before Christmas as originally expected, however I understand this is a as a result of differing methodologies used by the banks and do accept there are some logistical difficulties. For example, we heard anecdotally that there are 90,000 pieces of evidence for 30 pilot cases submitted by one of the banks with one case amounting to 31 lever arch files of evidence. Whilst I appreciate that it is important to get it right before the FSA press the go button for a full redress scheme for the small businesses it is crucial that the FSA and the banks understand that time is of the essence for many small businesses facing financial ruin."
By Neil Gerrard
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