Report into interest rate swaps scandal “watered down” after FCA pressure

According to reports in The Times, the regulator admitted John Swift KC had found it had breached its “regulatory mandate” when it excluded thousands of companies from compensation for the mis-selling of interest rate swaps, but this was removed before their report into the scandal was published after the authority “objected” to the conclusion.  

Published in December 2021, the Swift review concerned the regulator’s agreement with high street banks – under which they paid £2.2bn in redress to small and medium-sized companies that had been mis-sold interest rate hedging products.  

These were sold as “protection” against the risk of rising interest rates, but left thousands of businesses with high costs when rates fell. The report also found lenders failed to explain the risks associated with the products and mis-selling was found in 90% of cases.

The admission the review has been watered down appeared in court documents as the FCA defended itself during judicial review proceedings in which it’s accused of acting “irrationally” in rejecting Swift’s finding. Due to go to trial next year, it comes after an application by the all-party parliamentary group on fair business banking. 

According to The Times, the group has claimed the decision to reject the finding on sophisticated customers was procedurally unfair because of a lack of outside consultation on its decision not to compel further redress.  

In response, the FCA said it had considered ordering further compensation – but cited factors against doing so, including the “legal and practical impediments” to the action, and that intervening again would undermine confidence in the regulator “as a consistent, orderly and predictable regulator”.  

Speaking to The Times Simon Bishop – a partner for the law firm action the parliamentary group Hausfeld – said it was “troubling” the authority had been successful in persuading Swift to “water down” his conclusions.  

He added: “We look forward to the trial of this case next year so that excluded customers — many of whom have had their lives destroyed by mis-sold interest rate hedging products — can understand how and why the FCA permitted their exclusion.”

Meanwhile, a spokesperson for the authority told the outlet: “It is standard practice for those who may be criticised to provide feedback and make representations. While Mr Swift considered a range of views, it was up to him to decide on the final report.”