Banks and the FCA still lacking transparency in reviewing the IRHP scheme

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Posted in:Banking and Finance|October 20, 2015 | Join the mailing list

The Times has published news of the FCA agreeing to investigate the IRHP Scheme to determine if it failed customers it was seeking to protect.

We have long argued the endemic failures within the process, many of which are highlighted in our recent
Banking Report.

Customers seeking a review of the review process have come up against barriers imposed by the Banks and the FCA at every step of the way. The most glaringly obvious of these is the refusal of the Banks to publish the agreements by which they were going
to govern the review process entered into with the FCA in January 2013.

These were eventually published in February 2015 following intervention by the Treasury Select Committee (“TSC”) who argued they were of public importance.

The publication raised serious concerns regarding how the review scheme had been undertaken. Following publication, the TSC published its own report on SME lending in March 2015 and demanded the FCA answer a number of points. It transpires that response
was provided to the TSC in June 2015, but only published last week – and can be read


The FCA is seeking to argue that any Review of the IRHP Scheme should be delayed pending the outcome of judicial challenges to the Review process (for example the Holmcroft Properties Judicial Review). Andrew Tyrie, Chairman of the TSC, gave short
shrift to this idea and informed the FCA they needed to “get on” with the review.

A key factor of how the IRHP Scheme was to be governed was to allow only ‘unsophisticated’ customers to participate. To separate customers using this arbitrary definition, a £10m cap on hedging was introduced.  This allowed the banks to exclude any
customer with hedging of £10m and above and removed almost a third of potential complainants (all of whom had potentially high-value claims) from the IRHP Scheme.

The circumstances surrounding the imposition indicate it was introduced after the FCA’s letter to the Banks dated 17 January 2013.  berg, and others, are of the view the imposition was therefore a concession to bank lobbying, an allegation
denied by the FCA.

The FCA has so far refused however to disclose legal advice it may have received on the subject. The FCA is a public body, accountable to the country, with an obligation to be transparent as the regulator of financial institutions, including ones that
are publicly owned. Their conduct to date with the IRHP Scheme, including the latest announcement made yesterday, implies transparency is severely lacking. 

If there are any issues in this update or more generally that
you would like to discuss, please contact one of our Banking & Financial Regulation team on 0161 829 2599.

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by berg or any of its
partners or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.)


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