Barclays in hot water for interest rate swaps

One major provider of small business bank accounts has found itself in hot water after it was discovered that the bank had been instructing its staff to meet controversial interest rate swap sales targets, one former bank manager revealed.

Barclays senior corporate manager, Steve Smith, admitted to introducing his customers to the bank in order to meet his sales targets.  Mr Smith regretted the decision if any of his one-time clients now had to deal with heightened bills in the face of the swaps going sour, yet pointed out that if interest rates had gone up instead of plummeted, these same clients would be thanking him.

The Barclays executive, when asked if structured interest rate swaps were within the purview of commercial bankers and their training, responded that he cannot speak for every single one, but he knew the principles behind the controversial moves.  There was ‘some merit’ at the time the swaps were being devised, Mr Smith added, as the projections indicating an upwards trend – swapping to a fixed rate was supposed to offer a degree of protection against rising rates.

However, industry experts say that the revelation of bankers being encouraged to meet sales targets calls into question the propriety of these products, especially in regards to the small business bank account holders that purchased a large proportion of them.  Investigations into whether these swaps were mis-sold by bankers to customers indicate that some business owners had an imperfect understanding of what they were purchasing.

Barclays has also been called on the carpet by the Financial Services Authority, with the regulator demanding an apology after discovering that the bank had been informing its clients to withhold crucial information regarding swaps from the FSA.

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