The U.K. Financial Services Authority found through a pilot study that 90% of 173 interest-rate hedging products were sold without regulatory compliance. Among the violations: Clients were not told about exit costs; there were mismatches of amounts and durations with underlying loans; and sellers, including Barclays, HSBC Holdings, Lloyds Banking Group and Royal Bank of Scotland, never got an assurance that customers understood the risk involved. As a result, the FSA is ramping up enforcement.

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