Banking scandal: MPs query compensation scheme
A “SIGNIFICANT number” of businesses mis-sold financial products by banks have been treated unfairly by a compensation scheme, MPs have said.
The influential Treasury Select Committee has warned the government of possible “systemic failures” in the Financial Conduct Authority’s scheme that was set up to compensate firms mis-sold interest rate hedging products.
The Treasury Committee has urged the Financial Conduct Authority (FCA) to demonstrate that the scheme has not “unduly favoured the banks”. MPs said the review should be overseen by an independent party.
“It is far from clear that the FCA’s scheme has delivered fair and reasonable redress to all the businesses affected,” said committee chairman Andrew Tyrie.
The committee demanded that the Financial Conduct Authority conduct a full review of its redress scheme for tens of thousands of small and medium-sized companies.
Mr Tyrie said that if the FCA cannot prove that its compensation scheme is credible, the Treasury should intervene to ensure victims of the scandal receive a fair deal.
In an embarrassing report for the City regulator, the committee said it is “far from clear” whether the FCA’s scheme has delivered “fair and reasonable redress” to the businesses affected.
Victims, many of whom saw their businesses destroyed by the complex products, complain that banks have been allowed to minimise compensation because banks were given too far much influence over the redress process.
Mr Tyrie said: “Greater transparency is crucial in order to ensure that those SMEs mis-sold these products receive — and are seen to receive — appropriate redress.”
Several North West firms are at the vanguard of pursuing claims for small businesses against the banks. They include Manchester law firm Berg and Seneca Banking, based at Bolton, which gave evidence to the Treasury Select Committee.
Dan Fallows. director of Seneca Banking, said: “It is ridiculous that the banks are simply just self-adjudicating on these claims and they have ex-swaps salespeople reviewing whether these were mis-sold.”
Seneca says it is acting for several hundred businesses which claim to have been victims of banks’s mis-selling of complex products.
