High Court Upholds FCA's Decision on Bank Redress Scheme

The UK High Court dismissed a legal challenge by lawmakers against the FCA over a bank redress scheme on interest rate hedging products. Critics argued it excluded many businesses. The FCA maintained its position not to alter the scheme, designed to compensate for mis-sold products from 2001 to 2011.

The High Court in London delivered a decisive ruling on Friday, dismissing a challenge by British lawmakers against the Financial Conduct Authority (FCA) regarding the scope of a significant bank redress scheme worth £2.2 billion ($2.8 billion). The scheme was related to interest rate hedging products.

Originating after an independent review in 2021, the FCA faced scrutiny for not pursuing further action despite findings that sales exclusions lacked justification. The review found nine banks, including major names like Barclays, HSBC, and Lloyds, had engaged in unfair compensation practices, but the FCA's predecessor had set the bounds of the scheme in 2013, which critics argue left many small businesses excluded.

This redress scheme initially intended to rectify the fallout from financial products mis-sold between 2001 and 2011. Yet, the incorporation of a 'sophistication test' placed an exclusion on businesses exceeding 6.5 million pounds in turnover or 50 employees, prompting backlash from the All-Party Parliamentary Group on Fair Business Banking. In a conclusive written ruling, the Court supported the FCA's choice to stand by its decision, with the expectation that this judgment would bring closure to the longstanding issue.

(With inputs from agencies.)