Chris Leslie MP, Labour's Shadow Financial Secretary to the Treasury, has hit back at the Financial Services Authority's (FSA) scheme on banks mis-selling derivatives to UK businesses, saying he has 'serious concerns' over the agreement.
"The mis-selling of interest rate swaps by the big banks was a scandal requiring a strong response from the FSA earlier in the summer - but leaving it to the banks themselves to calculate compensation is like the wrongdoer deciding their own punishment," says Leslie.
"Labour agrees with the Federation of Small Businesses that a fully independent compensation process is needed to inspire confidence and ensure fair redress for victims of mis-selling. The Chancellor needs to listen to small firms who feel enough is enough," he adds.
In June, the FSA banned HSBC, Lloyds, Barclays and HSBC from selling interest rate swap agreements (IRSA) to businesses, after it found "serious failings" in the way and why they were sold.
Interest rate swap agreements (IRSA) 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 are used to hedge against extreme movements in market interest rates over a given period.
In the UK, 28,000 IRSAs have been sold and the banks are now under agreement with the FSA to investigate each case, with an independent reviewer appointed by the bank to determine whether there has been a case of mis-selling.
If they determine that a case of mis-selling occurred, the bank will decide on the amount of compensation to be paid out.
In a number of investigations by IBTimes UK have shown there is serious concern over whether the banks have been given too much power in addressing allegations of mis-selling.
On 20 September, the UK's Parliamentary Commission on Banking Standards (PCBS) unveiled a panel of MPs to look at issues surrounding banks' relationships with consumers and small businesses.
The panel will assess a range of issues, including the mis-selling of derivatives, and conduct a hearing within two days later.