Streeter condemns banks for mis-selling
Ministers should delay the sale of the Royal Bank of Scotland until it has paid full compensation to firms dragged down by the mis-selling of complex financial products, a Westcountry MP has said.
Gary Streeter, MP for South West Devon MP, was yesterday among backbenchers in Parliament to condemn banks that sold tens of thousands of small businesses so-called "interest rate swaps" that left businesses as small as B&Bs and takeaway shops in ruins.
The loans were at low interest levels, but were subject to rate increases and sky-high exit charges. Many customers failed to grasp the risks.
Mr Streeter backs "criminal sanctions" for bankers guilty of a mis-sold swap and said some of the biggest names in the sector still had to "decontaminate" their brand.
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The former minister wants the Government and the official watchdog to resolve the backlog of complaints, and highlighted the plight of Plymouth-based property firm London and Westcountry Estates in the Commons.
The business, which was started in 1983, went into administration after being unable to repay a £57 million bank loan it had taken out as an interest rate swap.
Founder Mike Hockin alleges that his bank, the Royal Bank of Scotland (RBS), gave them 24 hours to sign the agreement and that he was given the impression it had a three-year break clause that would allow either party to exit the agreement.
But he claims that when his company tried to terminate the loan after three years, they were told that only RBS could activate the break clause and that it would cost his business £11 million to exit.
In the Commons debate, Mr Streeter acknowledged there had been a "shift in culture" but banks had to deal with pre-2009 loans if they wanted to "decontaminate their brand".
He took RBS to task, arguing London and Westcountry's struggles "got worse" when the loan was sold to a new company, which was 25% owned by a US venture capital company called Blackstone and 75% owned by RBS.
He said RBS, bailed-out by the state, transferred the debt to a third party company that "set about dismantling the business that my taxpaying constituents had spent years building up". "That is an absolute disgrace," he said.
He later told MPs: "Several MPs have talked about criminal sanctions for the bankers who make such decisions. I add my support to that call. The people who knowingly make such decisions deserve to be investigated and penalised."
Mr Streeter said he has "no doubt that RBS is liable in law to compensate my constituents for their losses". He went on that Chris Sullivan, RBS UK corporate managing director, has told him every case of mis-selling – including that of London and Westcountry Estates – is being investigated, and that the bank will compensate "if mis-selling is established". "I am prepared to take him at his word, but need to see the process speeded up," he added.
He concluded: "I ask the minister to make it clear to RBS that it cannot go forward with any flotation until it has compensated properly all the small and medium-sized enterprises it has dragged down through mis-selling."