(Photo: Reuters)
(Photo: Reuters)

Barclays has confirmed to IBTimes UK that it is suspending interest rate swap agreement (IRSA) payments for some small to medium enterprises (SME) that are facing financial distress.

Speaking exclusively to IBTimes UK a spokesperson at Barclays says "Barclays will consider on a case by case basis suspending swap payments for customers in the scope of the Financial Services Authority's (FSA) review who are in financial distress. All of our customers in financial distress are assisted by our Business Support Specialists."

The move is seen as a turning point for thousands of SMEs that are facing financial hardship over IRSA payments they make every month, despite many of these businesses claiming that they have been mis-sold these products years ago.

On 29 June, Barclays, HSBC, Lloyds and RBS were banned by the FSA from selling these products to SMEs again and under an agreement, were asked to review the 40,000 products sold to determine if mis-selling had taken place, as well as what compensation would be due.

IRSAs are contracts between a bank and its customer where typically one side pays a floating, or variable, rate of interest and receives a fixed rate of interest payments in exchange.

They're used to hedge against extreme movements in market interest rates over a given period. Companies that have seen the value of these products move against them as rates fell during the recession, now owe banks crippling sums of money in interest payments each year.

Businesses and lobby groups have told IBTimes UK that many are barely surviving under the weight of just the swap payments alone and some have even fallen into administration.

Many of the businesses that were sold IRSAs alongside loans they had acquired over primarily the years of 2005 to 2007, have still had to make thousands of pounds worth of swap payments each month, even if there is a filed claim that they were mis-sold the product.

Until now, only HSBC  revealed that it has suspended swap payments for some customers on a case by case basis.