tailieunhanh - Interest rate hedging products - Information about our work and findings

A common argument in favor of usury laws is that without them, borrowers would be forced to pay exorbitant interest rates, or at least rates that are unreasonable in relation to the cost of supplying credit. According to economic theory, a competitive market is sufficient to prevent lenders from exercising power over pricing or earning more than a normal return. The price established in a competitive market reflects suppliers' costs of providing the given amount of that good. To be sure, removing a binding usury ceiling will result in higher interest rates. However, if credit markets are competitive, the resulting market rate of interest will not. | FSA update Interest rate hedging products Information about our work and findings Financial Services Authority Interest rate hedges include a variety of different products sold to customers to help protect them against interest rate risk. In principle interest rate hedging products can meet customers needs as they provide greater certainty over future loan repayments. However these products can also be very complex and therefore susceptible to mis-selling. Our review has found serious failings in the sale of interest rate hedging products to small and medium sized businesses SMEs . We have evidence which raises concerns about the sales we have reviewed in certain banks. These concerns include i inappropriate sales of more complex varieties of interest rate hedging products such as structured collars and ii a number of poor sales practices used in selling other interest rate hedging products. We also found that sales rewards and incentive schemes could have exacerbated the risk of poor sales practice. Practices varied across banks but we found sufficient evidence of poor practices to justify action by the FSA. Interest rate hedging products can be an appropriate product when properly sold in the right circumstances. However when sold to customers who are likely to lack expertise and understanding of the product . non-sophisticated customers some interest rate hedging products may be In order to provide a swift solution for customers we have reached agreement with Barclays Bank Plc Barclays HSBC Bank Plc HSBC Lloyds Banking Group Lloyds and The Royal Bank of Scotland Plc and National Westminster Bank Plc collectively RBS banks to provide appropriate redress where mis-selling has occurred. We have agreed with Barclays HSBC Lloyds and RBS that they will i provide fair and reasonable redress to non-sophisticated customers who were sold structured collars ii review sales of other interest rate hedging products except caps or structured collars for .