Derivatives may be one of the most complicated financial investments on the market. The Financial Conduct Authority (FCA) has created a chart to help consumers, barristers and bureaucrats understand whether a potentially mis-sold Interest Rate swap Hedging Product (IRHP) can be reviewed.

The Financial Conduct Authority (FCA) Interest Rate Flow Chart uses a flow diagram with “Yes/No” questions to show whether a debtor qualifies for regulatory review.

Interest Rate Swap Flowchart

Follow the interest rate swap flowchart question and answer in plain text below the FCA flowchart.


 FCA Interest Rate Swap Flowchart Questions & Answers

The FCA Interest Rate Flow Chart uses an “If this, Then that” process of questions. If all criteria are met, then the IRS can be reviewed by the FCA.

First Question

Did the customer purchase a derivative (separate from a loan) that had the function of protecting against interest rate fluctuations? There are two requirements here – 1) the derivative must have been a separate product and 2) it must have been used to hedge interest rates.

– No

If the answer is “No,” then the product cannot be reviewed by the FCA.

– Yes

If the answer is “Yes,” then the person can continue to the Second Question.

Second Question

Was the Interest Rate Hedging Product (IRHP) sold on or after 1 December 2001?

– No

No review.

– Yes

Continue to Third Question.

Third Question

This question has two branches, one for a “private customer” and one for a “retail client”.

+ Was the buyer a “private customer” purchasing the derivative on or before 31 October 2007?

+ Was the buyer a “retail client” purchasing the derivative on or after November 1, 2007?

– No

No review.

– Yes to either question, then continue to Fourth Question.

Fourth Question is “Sophistication Test”

Did the customer have the requisite knowledge and sophistication to understand the risk of the derivative?

– Yes

No review.

There is also a disclaimer suggesting that if the party does not qualify, he or she could seek legal representation.

– No

Continue to Fifth Question.

Fifth Question

Three thresholds (or criteria) are listed for a small group or company:

1) Turnover of more than £6.5 million net

2) Balance sheet total of more than £3.26 million

3) More than 50 employees

Does the customer meet at least the first criteria and the second or third criteria?

– Yes

No review.

– No

Continue to Sixth Question.

Sixth Question

Is customer part of a group of Connected Clients [single risk classification] with an aggregate notional value of the IRHP as more than £10 million?

– Yes

No review.

– No

This customer qualifies as non-sophisticated and has a case that can be reviewed by the FCA.

Daunting Challenge

In order for the FCA to review the Interest Rate Swap, it must be separate from a loan, used to hedge, purchased during a certain time period and the buyer must not be sophisticated. The issue of “sophistication” is the real test. For individuals, the criteria was knowledge; for companies, the criteria was wealth.

The process for having a case reviewed by the FCA is very difficult. Many UK citizens wonder if it will be easier to prove an Interest Rate Swap was mis-sold under the FCA. Only time will tell us the answer to that question.

FSA Changed to FCA

The first thing to note is that on 1 April 2013, the Financial Services Authority (FSA) became the Financial Conduct Authority (FCA). The FCA will inherit the rules of the FSA. While the chart has an FSA web site listed, the updated version is ““.

Derivatives Nomenclature

The FCA uses the terms, Interest Rate Swap (IRS) and Interest Rate Hedging Product (IRHP) interchangeably. In order to qualify for FCA review, the derivative must have been used to manage the risk of interest rates increasing.

Mis-Sold Interest Rate Swaps: Resource

Mis-sold Interest rate swap business recieves payout

The interest rate swap scandal has been one of the bigger scandals of the British financial systems, with many large banks such as Barclays and Lloyds ordered to compensate victims of the mis-selling of interest rate swaps. Interest rate swaps are essentially the exchange between counterparties of a fixed interest rate with a floating one. They are used primarily in businesses as a hedge against changes in the interest rate


Structure of an Interest Rate Swap Product

Like any financial product, especially one that is derived, the IRS is made up of several different types of options that the buyer can select from. For example, each party may agree to pay either a fixed or floating rate by using a selected currency. The rate or fee is then multiplied by a principal amount, and a mathematical factor is determined by the timing of the rate swap. The size of the cash flow is often decided by alternative currencies selected by both parties. The calculation of the rate swap is, of course, a product of a mathematical formula.


Interest Rate SWAP Claims, UK

Maple Leaf Financial have a specialist team of solicitors dedicated to dealing with the mis-selling of interest rate swap protection products by the banks. We are happy to review these relatively complex swap arrangements and to claim compensation for our clients where appropriate.

If you believe you have incorrectly been classified as a ‘sophisticated’ customer and have, therefore, not been eligible for interest rate swap redress. Maple Leaf Financial will review your interest rate product and we will be happy to discuss your individual concerns and requirements


Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.