How the IRHP review considers businesses in financial difficulty, businesses in administration and dissolved companies.
In June 2019 the FCA Board commissioned an Independent Review of the FSA, and subsequently the FCA’s, supervisory intervention on Interest Rate Hedging Products. On 14 December 2021 we published the Independent Reviewer’s report and the FCA’s response to its recommendations[1].
Businesses in financial difficulty
If your business is in financial difficulty, you should contact your bank. They continue to prioritise customers in financial distress, and over 1,000 customers have also had their payments suspended, pending the outcomes of their reviews (80% of customers that made this request).
The banks have also committed that, except in exceptional circumstances, such as where this is necessary to preserve value in the customer’s business they will not foreclose on or adversely vary any lending facility without giving prior notice to the customer and obtaining their consent. This is until final redress payments have been determined. To date, the banks have only invoked ‘exceptional circumstances’ on 11 occasions.
Businesses in administration
The fact a business is in administration does not affect its eligibility to participate in the review and does not change how its case will be assessed.
We recognise that the former directors or shareholders of a business in administration may be able to provide valuable insight into how the IRHP was sold. So when banks invite businesses in administration to submit any relevant information regarding the original sale, we expect administrators to offer the former directors or shareholders the opportunity to put forward their perspective.
However, it will be the administrators and not the former directors or shareholders who will engage with the banks during the review.
After the determination of fair and reasonable redress, including any consequential losses payable, the application of set-off and the order in which secured and unsecured liabilities are settled are matters of insolvency law.
Dissolved companies
The banks have agreed that, so far as possible, they will treat companies that have been dissolved consistently with all other customers.
- The banks will automatically review files of a dissolved category A company (i.e. where the IRHP purchased was a structured collar) and will make a reasonable effort to identify and contact the interested parties from the dissolved company, which is likely to include former directors and secured creditors, with the details of any redress offer. The interested parties can then decide whether they wish to restore the company to the Companies Register.
- The banks will make a reasonable effort to identify and contact the interested parties from a dissolved category B company (i.e. where the IRHP purchased was a swap or simple collar), which is likely to include former directors and secured creditors, to see if they want the dissolved company’s sales file reviewed. If they do, the bank will conduct the review and then inform the interested parties of any redress offer. The interested parties can then decide whether they wish to restore the company to the Register.
- If any interested parties from a dissolved category C company (i.e. where the IRHP purchased was a cap) contact the banks and request a review, the banks will review the case, and follow the same process as with dissolved category A and B customers (set out above).
If a company is restored to the Register, it is treated as if it had continued in existence and not been dissolved or struck off in the first place. For a business that was insolvent prior to being struck off, this means that any redress due would be subject to the rules on priority of distribution to creditors set out in insolvency law, which means that, in some cases, there may be little or no redress available for the company itself (and therefore to its shareholders).