The FCA has published an independent “lessons learned” review (the Swift Review), which it commissioned John Swift QC to produce, into the supervisory intervention on interest rate hedging products. The review considered the design, implementation and operation of the redress scheme set up for customers who were missold interest rate hedging products (IRHPs) from 2001.
An agreement that the then FSA entered into with 9 banks in 2013 resulted in redress of £2.2 billion to small businesses. The Swift Review has found that most customers eligible for the scheme likely obtained better outcomes than they otherwise would have.
The FCA will ensure any significant future decisions on redress will be transparent, with appropriate governance, and properly reported supporting evidence. A significant transformation programme is underway, but the FCA alleges that it already has improved systems, oversight and controls compared to those that were in place at the time. Nevertheless, the Swift Review identified 21 forward-looking recommendations, categorised into the following 5 topics:
- good regulatory practice in the development and use of voluntary redress schemes;
- greater willingness to use statutory powers;
- implementation/oversight and the importance of retaining ownership and control over regulatory interventions; and
- FCA decision-making and processes, including the principles of transparency and regulatory independence.
The FCA has also published its response in which it accepts all recommendations in the Swift Review bar one, and describes the changes it has made, or plans to make, in relation to each one. It will incorporate the recommendations into its wider work programme. The FCA also concludes that it will not use its powers to re-open the scheme, nor to require any further redress to be paid to IRHP customers.