FSA Said to Make Announcement Tomorrow on Swaps Probe
The U.K. Financial Services Authority will make an announcement tomorrow on its investigation into claims that banks improperly sold interest- rate derivatives to small businesses, two people familiar with the situation said.
The details of the announcement are still being discussed, said the people, who asked not to be identified because the negotiations are private. Sky News reported today that the FSA would unveil a plan to compensate bank customers who had been improperly sold interest-rate swaps.
Companies made around 605 complaints last year over banks’ bundling of interest-rate swaps with loans, FSA Chairman Adair Turner said in a letter to lawmakers last month. The London- based watchdog initially didn’t see any “widespread, underlying issues” with the practice and instructed firms to review their sales systems, Turner said.
Rate swaps are contracts that convert floating-rate debt into fixed-rate debt, or vice versa. They are supposed to keep payments within a specific range. When interest rates fall, for example, customers might pay less interest on a loan to balance out the higher cost of the swap.
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