Hidden Credit Liabilities: Role of the FCA

Neil Duncan-Jordan Excerpts

Tuesday 14th April 2026 Westminster Hall

[Neil Duncan-Jordan (Poole) (Lab)]

It is a pleasure to serve with you in the Chair, Sir Roger. I thank my right hon. Friend the Member for Hayes and Harlington (John McDonnell) for securing this debate on an issue that has long been overlooked. I want to take this opportunity to tell Members about James and Becky Glanville, who are in the Public Gallery today. They built a successful nursing home business, and their story shows how hidden credit liabilities attached to interest rate swaps destroyed a family enterprise.

The Glanvilles’ experience is a stark and deeply troubling example of how hidden credit liabilities attached to interest rate hedging products have devastated viable businesses. What began as a successful, family-run nursing home enterprise, built with life savings and years of hard work, was ultimately destroyed by undisclosed risks embedded within complex financial products sold by NatWest, which was part of Royal Bank of Scotland Group at the time.

The family were never informed that these swaps carried significant liabilities, which would be treated as secured debt against their businesses, eroding borrowing capacity and triggering breaches of loan-to-value covenants as interest rates fell, as my right hon. Friend mentioned. The hidden exposures escalated dramatically, putting the companies under severe financial strain and ultimately pushing them into restructuring and insolvency processes. Despite clear regulatory requirements for transparency and informed consent, the risks were not disclosed. Subsequent treatment within restructuring units, including asset devaluation and agreements that allowed the bank to profit further from the family’s losses, compounded the damage.

I will provide some background to the Glanvilles’ case by way of context. The family started their nursing home business in 2002 with their lifetime savings and a mortgage of £744,000. By 2007, the business had grown and needed further borrowing. That is when NatWest insisted that they take out interest rate hedging products as a condition of the loans. The family entered two base rate swaps, but what the bank never told them was that the swaps carried large undisclosed contingent credit line obligations, which were treated as hard secured liabilities on the company’s credit file and counted against the 70% loan-to-value covenant. The hidden credit lines ballooned as rates fell, triggering covenant breaches and damaging the business’ credit standing.

Such products were classed by the Financial Services Authority, as it was then, as a complex financial instrument that should normally be purchased only by investment professionals, yet they were sold to inexperienced clients such as the Glanvilles as free, no premium protection against interest rate risk. The additional costs and credit risks had to be disclosed to comply with the FSA’s conduct of business rules. Those rules stated that a firm can grant credit for such products if the customer has given prior consent in full knowledge of any resulting interest and fees. James and his family did not know of the risks or provide any written consent for them.

That raises the issue of the FCA’s role, which has already been mentioned. The FCA’s redress scheme failed to account for the impact of those hidden credit lines. By excluding that critical feature from the regulatory review, the system denied victims fair compensation and meaningful justice. The interest rate hedging products review was allegedly set up to compensate victims such as Mr Glanville and to put them back in the position they would have been in had the swaps not been sold in breach of the rules. All the banks signed an undertaking that the FSA rules would be complied with in the review, but instead the FSA and FCA agreed separate sales standards with the banks, which specifically excluded any mention of hidden credit liability and its effect. The regulator therefore effectively colluded with the banks to keep this undoubted fraud covered up and reduce compensation costs.

In 2019, Mr Glanville’s legal team calculated that, with the losses on the properties that were sold under value, the consequential losses and the interest, the family were owed £6.3 million. What they have received to date from the bank is absolutely nothing. As people know, the Glanville family case is not isolated; it reflects a wider systemic failure that affects thousands of SMEs. That underscores the urgent need for a full independent investigation into hidden credit liabilities and the associated regulatory failures, which must lead to the establishment of a fair and comprehensive redress scheme. Businesses and families that have suffered such a profound harm deserve accountability, transparency and ultimately justice. I hope the Minister will reflect on that in her response.