An independent review into the FSA’s – and subsequently the FCA’s – supervisory intervention on Interest Rate Hedging Products. We set out our response to the review.
The IRHP review
John Swift QC conducted the review[1], which was published on 14 December 2021.
FCA response
This is our response[2] to the Review and to its recommendations for us to act on.
We set out in the document our response to each recommendation and describe the relevant changes we have made, have in train or plan to make, to address each one.
Background to the IRHP review
In March 2012, the Financial Services Authority (predecessor regulator to the FCA) identified significant issues with the sale of IRHPs to UK Small and Medium Enterprises (SMEs). The FSA intervened and secured voluntary agreements with the banks to provide redress.
Following the Treasury Select Committee’s recommendation in its report Conduct and Competition in SME Lending[3] published in June 2015, the FCA committed to a review of its supervisory intervention on IRHPs. But the start of the review was deferred pending the conclusion of legal action relating to the redress scheme.
The independent review has considered what lessons can be learned from the intervention. The review was not intended to be a route to lead to the redress scheme, or individual cases, being re-opened.
Independent Reviewer and scope of the review
On 20 June 2019[4], the FCA announced the appointment of John Swift QC to carry out the review and published a detailed Terms of Reference[5] setting out the scope and parameters of the review.
We published a Protocol[6] setting out the approach to the conduct of the investigation and underlining the nature of the review on 14 August 2019.
John Swift QC biography
John Swift QC is a barrister and Head of Monckton Chambers from 1999-2002. From 2014-2019 he was the first Chairman of the Enforcement Decision Panel of Ofgem, the energy regulator. Over the same period he was a member of the Case Work Committee of Ofwat. He has been a member of the Determinations Panel of the Pensions Regulator since 2017. His experience of Regulation goes back to 1993-1998, when he was the first Rail Regulator, and the Cooperation and Competition Panel for NHS funded services (2008-2013).
John is a graduate of the University of Oxford and the Johns Hopkins School of Advanced International Studies and is a Fellow of the Chartered Institute of Transport and Logistics.
Next steps
We will incorporate the Review’s recommendations into a wider workstream, building on existing work we were undertaking on our approach to redress. We will incorporate this redress workstream into our wider post-review work programme, which is already driving forward improvements in response to the findings of the LCF[7] and Connaught[8] reviews in 2020. We will report regularly on our progress.
We will also update this website with the progress of our continuing transformation programme.
We will determine as quickly as we can complaints against the FCA arising from IRHP, including those we previously put on hold pending the findings of the Review. In line with our published Complaints Scheme, we will consider all complaints on an individual basis.
Correspondence with APPG on Fair Business Banking
Following the publication of John Swift’s review and the FCA’s response on 14 December 2021, we were in correspondence with the legal representatives for the All Party Parliamentary Group on Fair Business Banking (APPG) regarding a potential judicial review of the FCA’s decision in 2021 not to seek to use its powers to seek further redress for IRHP customers. We have published our responses to the APPG and its legal representatives and for ease of reference, the links to these can be found below. See the APPG’s website[9] for copies of the letters to the FCA.
FCA letter of 31 January 2022 to the APPG in response to its letter of 14 January 2022[10]
Judicial review
The judicial review will be heard on 10 and 11 December 2024.
Relevant documents setting out the FCA’s defence:
- Detailed grounds of defence[14]
- Detailed grounds of defence (as amended December 2024)[15]
- Skeleton argument[16]
We expect a ruling in the case in 2025.
