Banks in line for investigation over mis-selling

The Financial Services Authority (FSA) is set to reveal this week that it has found evidence of mis-selling as part of a review into the way lenders pushed the derivatives, a Sunday newspaper said.

Banks have denied any wrong-doing, saying they followed the rules on providing the swaps, which were a hedge against interest rates rising. When interest rates collapsed in the wake of the financial crisis, firms were left with high costs that some have claimed forced them out of business.

A full investigation by the FSA would take at least a year and raise the prospect of banks being hit with large fines as well as bans for any staff found to have broken rules.

The mis-selling claims follow the controversy over the sale of unnecessary payment protection insurance to millions of bank customers.