Explanation of the products and customers in scope of the review.
Products in scope for the review
- The review will cover sales of IRHPs entered into after 1st December 2001. These products include collars, structured collars, interest rate collars and interest rate swaps. Further details can be found on the FCA’s website.
- Interest rate caps will only be included in the review if the purchaser complains to Barclays about its sale during the course of the review.
Customers in scope of the review
- Only customers classified as "retail clients" or "private customers" are included in the review. The definition of "retail clients" is applicable for sales concluded on or after 1 November 2007 and can be found in the FCA handbook . The definition of "private customers" is applicable for sales concluded before 31 October 2007 and can be found in the FCA glossary.
- Any retail or private customer that did not meet the “sophisticated” criteria, at the time of purchasing their IRHP, is automatically classified as a “non-sophisticated customer”. Only non-sophisticated customers are included in this review.
Following the FCA’s assessment of the pilot exercise, the sophisticated customer criteria has been modified to provide a greater level of assurance that the review will be focused on those small businesses that were unlikely to have had the specific expertise and skills needed to understand the risks associated with these products. The test has two stages, an objective test and a subjective test.
Further information about how the objective test will be conducted is available on the FCA’s website and in their FAQs which can be found at Interest rate hedging products review . Hardcopies can be provided on request.
If a customer has not met the sophisticated criteria following the objective tests, a subjective test will be applied.
Under the subjective test, any customer may be classified as sophisticated if it can be demonstrated that at the time of the sale the customer had the necessary experience and knowledge to understand the service to be provided and the type of product or transaction envisaged, including its complexity and the risks involved. The subjective test if met would overrule the objective test, resulting in such a customer being classified as sophisticated.
Barclays will work closely with our customers to ensure that a fair and accurate assessment of their sophistication is reached in accordance with the above principles, further details of which can be found on the FCA’s website.