Sir David Walker, who led a high-profile review into banks’ corporate governance, said that complex interest rate “swaps” should never have been sold to retail customers reports The Telegraph.
Britain’s biggest banks are alleged to have systematically mis-sold the hedging products to small businesses. Following a Telegraph investigation, the Financial Services Authority (FSA) is now deciding whether to take action.
Giving evidence at a Treasury Committee hearing, Sir David said there had been “two major failures”.
“The regulators should never have allowed access to the retail market for these complicated products and that goes much wider than the swap products,” he told MPs.
Secondly, he said, bank boards had been “taken in” by staff eager to distribute these lucrative products and had been persuaded that they were “customer-friendly”. Senior management should have taken a “firmer line”, he said.
He also wants SMEs to have the right to complain to the new consumer regulator, the Financial Conduct Authority.
The swap row has echoes of the payment protection insurance (PPI) scandal, which saw the product widely sold to consumers unaware they were buying it or unable to claim. PPI was the most complained-about financial product last year, accounting for nearly two thirds of consumer disputes mediated by the Financial Ombudsman Service.