Oct. 05--Vince Cable last night slammed banks for delaying compensation payments to small businesses mis-sold insurance, describing the scandal as a 'catastrophe' for many firms.
The Business Secretary's comments echo those made by City watchdogs as they revealed just 32 offers of compensation totalling pounds sterling 2m had been accepted by companies lured into taking out interest rate swaps alongside loans.
Nine banks were ordered in May to review almost 30,000 sales of these swaps complex financial instruments designed to protect small businesses from a rise in interest rates.
When interest rates fell to record lows in 2008, many firms in the most complex arrangements saw their rates soar or were hit with crippling 'break fees' if they wanted to move to a cheaper loan.
The mis-selling was first identified by the defunct watchdog the Financial Services Authority last summer when HSBC, Lloyds and RBS agreed to compensate customers.
Cable said: 'Mis-selling of complicated financial products by banks has been a catastrophe for many small businesses.
'This latest report from the FCA is welcome, but shows that the banks are still taking far too long to sort out who is entitled to redress. The banks must not compound the scandal by dragging their feet over compensation.'
It came as banks received a sharp rebuke from the regulator. FCA chief executive Martin Wheatley said the banks were now moving in the right direction, but added: 'Many small business owners have been waiting too long to find out if they were mis-sold and we are now eager to see people repaid as soon as possible.'
The watchdog said 85pc of the sales 25,000 cases are now being investigated.
It expects the number of compensation offers to increase rapidly and said that most customers should receive the results of their review and any offer of a pay out by the end of the year.
RBS appears to be dragging its heels more than most, having made just 21 offers of compensation.
This is despite having the biggest case load, with 9,713 cases to review.
HSBC has made the most offers with 194 followed by Barclays with 159.
An RBS spokesman said: 'We are committed to ensuring that all those that were mis-sold these products get fair and reasonable redress as quickly as possible.'