FCA publishes the Swift Review into the supervisory intervention on interest rate hedging products

The FCA has accepted recommendations made by John Swift QC, who was commissioned to review the design, implementation and operation of the redress scheme set up for customers who were missold interest rate hedging products (IRHPs) from 2001.

The actions taken by the Financial Services Authority (FSA) nearly a decade ago delivered redress of £2.2 billion to thousands of small businesses. The FCA welcomes the review’s finding that most customers eligible for the scheme in all likelihood obtained better outcomes than could have been achieved outside of it. 

Targeting this scheme so that it could be quickly rolled out to the small businesses that needed it most was a complex undertaking. Nevertheless, the FCA has acknowledged clear shortfalls in processes, governance and record keeping when decisions about the redress scheme were made, and a lack of transparency.  

The FCA will ensure that any significant decisions on redress made in the future will be transparent, with appropriate governance, and supporting evidence will be properly recorded.

The FCA already has a more proactive approach and better systems, oversight and controls than were in place when the IRHP sales took place. A significant transformation programme is underway to ensure the FCA is a more innovative, adaptive and assertive regulator that can and will investigate and act earlier. 

The FCA does not consider that the FSA was wrong to limit the scope of the redress scheme to less sophisticated customers and has concluded that it would not be appropriate or proportionate to take further action. Accordingly, the FCA will not seek to use its powers to require any further redress to be paid to IRHP customers.

Charles Randell, Chair of the FCA, said:

'I would like to thank John Swift QC for his thorough and thoughtful review. The FCA today is a very different organisation from the FSA as it existed when these products were sold and when it established the redress scheme. We would expect to act far sooner and more decisively today.

'We are transforming the FCA into a more innovative, adaptive and assertive regulator that is fit for the future. Mr Swift has made helpful recommendations that will strengthen our regulation, our supervision of firms and our approach to redress.'

Notes to editors

  1. Read the Report of the Independent Review into the FSA and FCA's supervisory intervention on Interest Rate Hedging Products (IRHP).
  2. Read the FCA’s response to the Report.
  3. In 2012, the FSA identified failings in the way some banks sold IRHPs and after careful consideration chose to pursue a voluntary redress scheme. Initial agreement on the scheme was announced in June 2012 and, following a pilot exercise, a supplemental agreement was agreed and announced in February 2013.
  4. A review into the FCA’s supervisory intervention on interest rate hedging products was recommended by the Treasury Select Committee in its June 2015 report Conduct and Competition in SME Lending.
  5. In 2015, the FCA confirmed it would accept the Treasury Select Committee’s recommendation to undertake a review of the Scheme once legal proceedings connected to it had concluded.
  6. In June 2019, the FCA Board asked Mr Swift QC to examine the quality and effectiveness of the supervisory intervention, assess the FSA and FCA’s judgments and actions involving the redress exercise, and set out lessons that could be learned.
  7. The Swift Review covers the period from 1 March 2012 to 31 December 2018, examining the implementation and operation of the pilot and subsequently the full redress scheme.
  8. The FSA was the FCA’s predecessor as the regulator of the financial services industry in the UK. It was abolished on 1 April 2013 and its responsibilities split between two new regulators, the FCA and the Prudential Regulation Authority.