UK lawmakers seek judicial review of blanket repair scheme

Nikhil Rathi, then CEO of the UK division of the London Stock Exchange, arrives at 10 Downing Street in London, Britain January 11, 2018. He is now chief executive of Britain’s Financial Conduct Authority. REUTERS/Peter Nicholls/File Photo

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LONDON, Jan 17 (Reuters) – Lawmakers are seeking judicial review of a decision not to expand a UK remedies scheme for companies that were wrongfully sold interest rate “hedging” products, saying that this had allowed the banks to reduce compensation payments by £10 billion. .

Thousands of small businesses have received £2.2bn ($3bn) from nine banks including HSBC, Barclays, Lloyds and Royal Bank of Scotland under the redress scheme, which was set up there has almost ten years for badly sold products from 2001.

But an independent review said last month that excluding around 10,000 sales of products, meant to protect businesses from rising interest rates, from the program, a third of the total, was an “inadequate regulatory response.” “.

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When rates fell, the companies that bought the products had to pay crippling additional fees, often running into the tens of thousands of pounds.

The review said the FCA, after representations from some banks, agreed to exclude “sophisticated” customers, defined as companies with two of three characteristics with a turnover of more than 6.5 million. pounds, a balance sheet of more than 3.26 million pounds or more than more than 50 employees, of the scheme.

There was no explanation as to why the change was accepted by the regulator, according to the review.

“The regulator cannot produce any evidence to support the decision or even recall what the reasons were for the exclusion of so many victims. compensation bill,” Kevin Hollinrake, who co-chairs the All-Party Parliamentary Group on Fair Banking, said in a statement Monday.

The group said it had called on FCA CEO Nikhil Rathi to reconsider after the watchdog said in December that further action would be neither appropriate nor proportionate.

He said he is now filing an application for judicial review, which refers to a judge reviewing the legitimacy of decisions made by a public body.

An FCA spokesman said it was a very different organization than it existed when the products were sold and when the voluntary appeal system was established.

“We have accepted many of the recommendations of the Independent Review,” the spokesperson added. ($1 = 0.7311 pounds)

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Reporting by Huw Jones; Editing by Alexander Smith

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