Treasury Minister Greg Clark is understood to be standing by his reply to Dundee West Labour MP Jim McGovern, who had asked why a constituent's fixed rate tailored business loan (TBL) was excluded from the mis-selling review instigated by the Financial Services Authority.
As The Herald reported, Mr Clark told Mr McGovern that "even though the product was not within the review's terms of reference, Clydesdale has agreed to consider it as part of the review". But hours later, the bank said "this case is not being considered as part of the review".
Spokesman Barry Gardner confirmed yesterday: "We are not looking at any fixed rate TBLs as part of the review but have been clear from the outset we will look at any complaint about product sales within our existing complaints process."
Now Business Secretary Vince Cable is said to be ready to press the FSA to extend the review to all fixed rate loans which, like the Clydesdale's, contain "embedded swaps", but which fall outside the scope of FSA regulation.
Any extension could open the floodgates to a wave of new claims against other banks, and trigger a potentially significant increase in their provisions for mis-selling liabilities which have been more than doubled to £2 billion.
Clydesdale Bank is understood to be seeking a meeting with Mr McGovern, while Mr Clark is said to be standing by his statement.
Mr McGovern said: "It beggars belief that products that look like, sound like and smell like the products currently being investigated by the FSA have not been included in the thorough review now under way."
He went on: "I will be seeking further clarifications from the Government. It appears to many they are letting the banks get away with shocking examples of bad practice. They are badly letting down small businesses who are struggling to cope with the costs being inflicted on them because of these products."
Jim McGrory of the NAB Customer Support Group, most of whose members have fixed rate TBLs, said he and others would be re-contacting their MPs to press for their loans to be in the review.
Abhishek Sachdev, derivatives expert at Vedanta Hedging, said: "We will continue to argue these products are derivatives and as such this is equally a case of regulatory failure by the FSA."
James Ducker, at Benchmark Treasury Pricing, said: "It is farcical to allow derivatives to be called something different or embedded into a loan and thus avoid the regulator."