Seven smaller banks have signed onto an effort to review, and redress, improper sales of interest rate hedging products, which was announced by British regulators last month.

On June 29, the UK’s Financial Services Authority (FSA) announced that four big banks (Barclays, HSBC, Lloyds and RBS) had agreed to provide redress to customers who were improperly sold complex interest rate hedging products, after the FSA’s review of these sales found a range of poor sales practices including: poor disclosure of exit costs; failure to ascertain the customers’ understanding of risk; non-advised sales straying into advice; over-hedging; and, incentives driving these practices. And, it noted that the improper sales resulted in “a severe impact” on a large number of the small- and medium-sized businesses that bought these complex products.

On Monday, the FSA said that seven additional banks have volunteered to review their sales of these products, too, including: Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire banks, Co-operative Bank, Northern Bank and Santander UK. They will participate in the review and redress exercise on the same basis as the larger banks.

The regulator notes that these seven banks represent a small proportion (around 10%) of the overall interest rate hedging product sales in the United Kingdom. And, the FSA has not examined their sales of these products, so it has not found whether they have engaged in the same practices as the larger banks. So, it notes that by agreeing to join the review, the banks are ensuring customers that bought these products will be treated consistently regardless of who sold them.

The FSA also said that it has now agreed with the four larger banks on the terms of reference for their independent reviewers, and it expects the banks to proceed rapidly with their reviews.

Clive Adamson, director of supervision in the FSA’s conduct business unit, said, “The terms of reference that we have agreed for the independent reviewers shows the detailed and thorough scrutiny that we will expect of them.”

Adamson also noted that the participation of the seven smaller banks in the review and redress exercise, “shows their willingness to do the right thing and ensure their customers who bought these products can be confident that they will be treated on an equal basis.”