EXCLUSIVE: MPs to Grill FSA Over Mis-Selling Derivatives Scandal

The Financial Services Authority will face MPs in December after a cross-party parliamentary group tasked with investigating banks mis-selling derivatives has called for a re-examindation of the regulator's agreement with the banks.

Sources tell IBTimes UK that the meeting will take place in the Thatcher Room, Portcullis House on 13th December 2012 from 1200 to 1300 GMT, solely to discuss the mis-selling derivatives scandal, the subsequent agreement with the banks and 'far redress' for some 40,000 products that have possibly been mis-sold.

However, it has not yet been revealed which FSA executives will be questioned.

So far, discussions over this subject at various Committee hearings have been embedded with other discussions with expert witnesses, banking chiefs and regulators.

However, in October this year, Conservative MP Guto Bebb officially set up a group of influential cross-party MPs to form a parliamentary group to investigate the mis-selling of interest rate hedging products by UK banks to small-to-medium enterprises (SME) and since then the discussion between Parliament and the regulator has stepped up.

The All-Party Mis-Selling Group (APMG) has won the support of about 50 MPs from across the political spectrum who have signed up. It is indicative of the level of concern over the scope and scale of damage that mis-selling derivatives has caused for SMEs and the wider economy.

"That 50 MPs from across the political divide have already joined the group is testament to the serious concerns in parliament about the problems that swaps are still causing SMEs despite the acceptance from banks that mis-selling took place," said Bebb, who is the groups' chairman.

"While the FSA has recognised the scandalous way SMEs have been treated by the banks, there are genuine concerns from thousands of business owners that the redress scheme fails the independence test and is moving far too slowly to save some business owners from the financial ruin caused by swaps. Our new cross-party group will focus our energy on securing justice for small business owners and making sure that the banks are never able to cause this kind of harm again by reckless sales practices," he added.

The FSA announced on 29 June that it had banned HSBC, Barclays, Lloyds and RBS from selling IRSAs in the future but its subsequent agreement with the banks has caused outcry among business owners, market participants and politicians.

The agreement allows the banks, with the help on an independent reviewer that the banks also appoints, to investigate the 40,000 IRSAs sold to determine if mis-selling occurred. The banks are also in charge of deciding whether compensation is due and also the scale of redress.

However, there is no deadline for any of the investigations or a scale of compensation within the FSA and banks' agreement.

The FSA has declined to comment and appropriate representatives at Parliament were not immediately available to comment by the time IBTimes UK published this article.