In a circular seen by The Daily Telegraph, jointly-owned Clydesdale and Yorkshire told customers they would look at the sale of fixed-rate loans to small businesses as part of the current industry review into the mis-sale of interest rate swaps.
They said the review would now take in “the sales of certain TBL [tailored business loans] products”, in a move that will put the pressure on other banks to take similar steps.
More than 40,000 interest rate swaps are estimated to have been sold to small businesses, according to the Financial Services Authority. Including fixed-rate loans products could easily double this number, according to derivatives experts, and enormously increase the potential compensation cost to banks.
“If fixed-rate loans become part of the official review then this will massively increase the potential compensation bill for the banks,” said one industry observer.
The fact sheet sent out by Clydesdale and Yorkshire identifies 11 separate loans that contain features that mean they could have been mis-sold, of which five would fit the FSA definition of products that banks have now been barred from selling to small businesses.
At the weekend, Ed Miliband told The Sunday Telegraph he would “personally” intervene with the FSA to examine complaints by several small businesses that the regulator’s independent compensation scheme is taking too long and gives too much power to the banks.
All of Britain’s four major high street banks have signed up to the scheme as have seven other smaller lenders, including Clydesdale and Yorkshire, and Santander UK.
Barclays has made a £450m provision against the cost of compensating customers mis-sold interest rate swaps, the largest of any bank, while HSBC and Royal Bank of Scotland have also set aside money to pay claims. Lloyds Banking Group has said it does not expect the compensation claims to be “material”.
