Irish SMEs not targeted by banks in mis-selling investigation
IRISH small and medium enterprises (SMEs) are not believed to have been affected by the alleged mis-selling of interest rate protection to SMEs in the UK, despite Bank of Ireland (BoI) and Allied Irish Banks (AIB) being named in the investigation.
Britain's Financial Services Authority (FSA) is leading a probe into how a number of banks sold interest rate swaps (IRS) to small firms during the boom years.
The swaps are a derivative that is used extensively to allow firms to take advantage of lower interest rates in different territories, depending on what currency they need to borrow.
The swaps can be used as a hedge against interest rate and currency movements. In practice, however, the FSA claims that in many cases the business was not correctly informed of the downside risk on holding the IRS; while, in other cases, the cost of buying the swap was far higher than the potential loss a company could face if it didn't buy the protection.
In a statement, the FSA said the two banks and five others announced yesterday have a around 10pc of the overall interest rate hedging product sales in the UK.
"The FSA has not examined their sales of interest rate hedging products and so has not made any finding of mis-selling, but in agreeing to join the review, they are ensuring customers that bought these products will be treated consistently".
At this stage AIB and BoI have agreed to co-operate with the FSA's inquiry, although they are not accused of wrongdoing.
Industry sources here played down any suggestion that the banks may have sold the same products domestically.
AIB is not believed to have sold the same product here, while BoI had a "tiny" amount of business in that division in Ireland.