Banks in UK including BoI and AIB may have to give refunds
A number of banks in the UK, including Bank of Ireland and AIB, might have to compensate customers for improperly selling interest rate hedging products (IRHPs) to small companies, the Financial Services Authority said yesterday.
This follows an announcement on January 31st by the FSA that Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland would start work on reviewing sales of IRHPs to small businesses in line with the approach set out in an FSA report.
AIB, Bank of Ireland, Clydesdale and Yorkshire banks (part of the National Australia Group), Co-operative Bank and Santander UK have also agreed to review their sales of IRHPs.
About 90 per cent of the products broke UK rules, the FSA has said, adding that a “significant proportion of the cases” would “result in redress being due” to customers.
Bank of Ireland said it has identified fewer than 100 interest rate products that fall within the scope of the FSA review. Bank of Ireland said its pilot review has confirmed the “significant majority of sales were to sophisticated customers and not to the SME sector”.
It also noted its UK business banking operation is primarily focused on specialist sectors such as property, hotels and healthcare, and not on retail.
AIB declined to comment.
The exposure of the Irish banks to offering refunds is expected to be low, sources indicated.
Barclays, RBS, HSBC and Lloyds reached agreement with the FSA on January 31st to review deals and compensate customers improperly sold rate-hedging products.
The lenders may have to pay as much as £5 billion to compensate customers following the probe.
The British Bankers’ Association said the FSA’s announcement “gives clarity” and enables banks to take steps to resolve the issue.
“Where customers have suffered unfairly the banks have all agreed that they will put it right,” it added.
– Additional reporting by Bloomberg