Interest Rate Swap Products

Baroness Primarolo Excerpts

Thursday 21st June 2012 Commons Chamber

[Guto Bebb]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Before the hon. Gentleman rises to deal with that point, may I gently remind him that he was supposed to speak for about 10 minutes? He has been extremely generous in taking interventions, but there is a time limit for everyone else who wants to contribute, and it is getting shorter the longer he speaks.

[Guto Bebb]

Thank you for your guidance, Madam Deputy Speaker. I will refrain from taking any more interventions and finish my comments.

The figures from Bully-Banks illustrate the fact that businesses feel that they have been mis-sold such products. The final figure from Bully-Banks that is worth mentioning is that 75% of its members claim that the swap product was a condition of the loan agreement that they entered into. Some Members might say that the way forward is therefore for individual businesses to take legal action on that basis, but I have concerns about that. A solicitor said to me yesterday that the problem in England and Wales is that the law is far too bank-friendly. There is a concern that in many cases businesses that take legal action face costly cases before the banks finally settle and put in place a gagging order. It is also a concern that small businesses should be expected to fund their own cases when they are already in crisis

[Guto Bebb]

I will not take another intervention, due to the guidance from Madam Deputy Speaker.

Small businesses that have to take legal action also face the risk of losing the support of their banks. There are examples of loans being called in or overdraft facilities being taken away from businesses that are taking action. I therefore do not think that the way forward is necessarily to expect individual businesses to take action against the banks, unless we can have some certainty that the banks will not act in that way.

The scale of the problem is significantly greater than we have accepted to date. Today the Law Society Gazette gives the figure of about 4,000 businesses affected, with about £1 billion-worth of potential claims. In my view that figure is probably an underestimate, so the scale of the problem should be taken seriously.

Let me state what I am calling for from this debate. It is very easy to have a debate in which we all highlight our concerns about individual businesses and our belief that the banks have behaved badly, but this House has a responsibility to try to offer a solution. We need to encourage the Financial Services Authority to move more quickly to a resolution of this issue. It needs to inform the banks that, for example, they have an obligation and a responsibility to act fairly with their clients. We also need some transparency from the banks about the exact size of the problem. We know, for example, that between 2006 and 2010 the banks engaged in significant amounts of swaps. Some of them might have been completely legitimate, but quite a few were sold to small businesses.

Those small businesses are feeling under pressure from their banks, so my specific request today is for the Minister to call on the FSA to give written assurances that the banks will not adversely treat any business that makes a complaint. We live in a country governed by law. If a business wants to make a complaint, it should not be subject to undue pressure from its bank. In the same way, if a complaint has been made to a bank or the FSA, the bank should refrain from foreclosing on that business. Those are my short-term requests for the Minister. In the long term, I think it is crucial—

[Madam Deputy Speaker]

Order. The hon. Gentleman was allocated 10 minutes. He has now been speaking for 20 minutes. There are about 15 Members wishing to take part in this debate, which is due to conclude at 2.30 pm. Will he please now make one more, brief remark and then resume his seat?

--- Later in debate ---

[Hon. Members]

Hear, hear.

[Madam Deputy Speaker]

I remind Members that the time limit is eight minutes for Back Benchers. There are a large number who wish to participate in this important debate. It may therefore be necessary to reduce the time limit. We shall have to see how we proceed, but we shall start with eight minutes.