Parliamentary Commission on Banking StandardsSupplementary written evidence from Barclays

Update on Barclays Review of the Sale of Interest Rate Hedging Products

I am writing to update you on our review of the sale of interest rate hedging products, and to provide your office with an updated Barclays Guide to the Review of Sales of Interest Rate Hedging Products.

Following a successful Pilot, on 31st January the FSA announced that we may proceed with the main review. We have spent the last couple of weeks making the changes required by the FSA, which have now been approved by the Independent Reviewer and I am pleased to let you know that yesterday, we started our main review process.

This week, therefore, we have written to all our customers who are potentially in scope of the review and provided them with a copy of the updated Barclays Guide and updated them on the progress we have made. We have also today commenced the review for the first wave of ca. 750 clients into the review process.

We have agreed with the FSA that we will prioritise the review of sales of interest rate hedging products to customers who are in financial difficulty and accordingly are reaching out to those customers which we believe are entitled to have their swap reviewed and are in financial distress as a matter of priority.

We are committed to ensuring that Barclays provides swift redress to customers where the Interest Rate Swap Remediation Review identifies this as being appropriate and we are committed to prompt resolution. To enable this, we have devoted sufficient resources to enable our review to be completed within the FSA’s timeframe of 6–12 months. However, this timeframe does depend on each customer responding in a timely manner in order to enable us to progress each case.

We remain very aware of the issues faced by some of our customers in these economically challenging times and recognise the potential impact on those customers of the time required for us to undertake a comprehensive, independently scrutinised review. We continue to implement a policy of suspending swap payments for customers which we determine to be in financial distress where it makes sense to do so. To date I’m pleased that we have suspended swap repayments for over 150 customers.

As in my earlier correspondence, I thought it would be useful to highlight the different stages of the review process. I hope this will be useful as you support constituents involved in this process:

Pilot Programme

The FSA required Barclays and all other banks involved in the review to conduct a pilot programme. The purpose of the pilot was to develop a detailed methodology on how the review will be conducted to ensure all customers in-scope of the review are treated fairly and consistently. The Independent Reviewers and the FSA used the pilot to assess Barclays approach and provide feedback and suggest changes where they felt this was necessary.

Review process

Following the Pilot, Barclays is now proceeding with the five stages of the review process:

Stage 1—Initial in-scope letter informing customers who have been classified as non-sophisticated that there are two possible outcomes that apply to them:

(i)If a Structured Collar product was purchased then the customer will automatically be included in the review.

(ii)If the interest rate hedging product was not a Structured Collar (excluding caps) the customer will be asked whether they want the sale of that product to be reviewed.

Stage 2—Comprehensive and impartial fact find:

This comprehensive and impartial fact find will be customer-centric in approach and conducted impartially by Eversheds (a law firm with significant experience in public inquiry work). The customer feedback will be important when it comes to helping us and the Independent Reviewers decide on whether mis-selling has occurred.

Stage 3—Decision process:

Once the customer review has taken place, a team of carefully selected experienced and impartial practitioners (Customer Review Directors) will review the completed report and reach an initial decision if redress is due. Each of these decisions will be subject to a separate review and approval by the Independent Reviewer and if they agree that the decision is fair and reasonable according to the FSA’s review criteria the case will continue. If they do not agree that the decision is fair and reasonable it will be returned to the Customer Review Directors.

Stage 4—Customer meeting:

To those customers who are due to receive redress, the Customer Review Director, accompanied where necessary by a regulated Interest Rate Hedging specialist, will meet with the customer to discuss the review and its findings. The customer will also have the option of having the Independent Reviewer present at the meeting.

Step 5—Closure of review for redress offers:

If the review process concludes that a customer is due redress, Barclays will make a redress offer to the customer.

I appreciate that customers want to know as much as possible about the review and I hope that this Guide makes the review process clearer to them and to you. If you have any further question about our review progress, please let me know.

19 February 2013