U.K. Regulator Set to Investigate Swaps, Sunday Telegraph Says

The U.K.’s Financial Services Authority will say on June 29 that it has discovered that some of the country’s banks inappropriately sold complex interest-rate derivatives to small businesses, the Sunday Telegraph said.

Banks expect the regulator to formally investigate the matter, which would take at least a year and could lead to financial penalties for banks and bans on any bankers who violated FSA rules, the newspaper said, without saying where it got the information. Lenders could also be pressed to agree to compensate any victims of mis-selling, according to the report.

“We will update on our findings by the end of this month,” Joseph Eyre, a spokesman for the FSA, said in a phone interview today. “We’re not commenting in the interim.”