Barclays and Deutsche Bank have recently been designated defendants in civil lawsuits filed by current lending customers. The banking institutions previously intiated an independent review of their loans that had included an additional insurance product called an interest rate swap. The interest rate swap product allowed the interest rates on the loan outstanding to move against any interest rate changes in the open derivatives markets. Any interest rates that moved negatively would be hedged with the additional interest rate swap product that was being sold to new customers.

Banks Legal SWAP Battle

Barclays And Guardian Care Homes
Barclays approved two commercial loans for Guardian Care Homes for a total of 70 million pounds. These two loans had additional loan insurance in the form of an interest rate swap. Guardian became over burdened with debt when the interest rate markets changed in direct contrast to what was expected. The residential care home operator was approached by Barclays as a sophisticated customer with advanced financial professionals and was excluded from a work out that had been approved by the banking institution. Guardian filed a civil suit in open court saying that the loans outstanding were faulty because they contained an interest rate swap product that was not sold properly.

Recent Court Decisions
Recent court decisions regarding Guardian and another civil plaintiff have brought the issue of the Libor manipulation scandal into the open civil court room. The Libor scandal was a part of a recent settlement paid by Barclays because of allegations that certain Barclays banking employees had deliberately changed critical interest rates in order to make a profit. This scandal caused the banking employees to be asked to leave the company. The bank has paid out several fines because of this unprofessional conduct.

Guardian And Unitech
The Indian property company Unitech filed an additional lawsuit similar to the one filed by Guardian. Unitech alleged in the lawsuit that Deutsche Bank sold faulty interest rate swap products in addition to the lending products offered. Both of these civil lawsuits are indicating that the loan departments of Guardian or Unitech were not informed about the nature of the insurance product sold along with the lending products.

Recent Court Decisions
Barclays has attempted to have the outstanding civil court case dismissed because of certain irrelevant information that has been included in the court intake information. Barclays requested that information about the Libor scandal be excluded from a civil trial or further court proceedings. A recent Court of Appeal in London denied this motion to suppress the Libor information and denied the motion to dismiss the civil case.

Barclays And Deutsche Bank In Open Court
The cases against these two banking giants seem to be moving forward. The civil trials for the two banking institutions may occur next year. The fact that these cases are moving towards civil trial may open the doors for other companies to follow suit. This type of public court trial may set a new precedence for banking customers who feel that they have purchased a product that was not properly explained to them.

Determining The Recent Court Allegations
The attorneys for Barclays have attempted to limit the type of information that is included in a civil banking trial. Banking attorneys are indicating that the Libor manipulation claims are not legally related to the mis sold interest rate swap products. The recent court decision to move the civil case forward brought up this important decision. There may be an attempt to eliminate the connection between the Libor interest rate manipulation scandal and the interest rate swap products sold.

The possible open civil trial that loams in the courts for next year may decide many important factors for future banking interest rate products. Certain information about Barclays and other banking employees may become a part of a public civil trial. Banking has lost a major legal battle.

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Interest Rate Swap News

Swap Claims Compensation Too Slow, Says FCA

The Financial Conduct Authority (FCA) has stated that compensation for swap claims has been too slow, and that some businesses may suffer because of the delay. This has caused a large amount of frustration on the part of customers who were sold these interest rate swap deals and have suffered as a result.

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Dealing with Consequential Loss from Interest Rate Swaps

When will the investors who were mis-sold interest rate swaps (IRS) be compensated for their losses? The High Street banks were paid in 2008, but why aren’t the regular investors being compensated? The banks have admitted guilt. So why the slow process?

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What is the FCA Sophisticated Customer Test?

In January 2013, the FCA published what it found with regard to the pilot review scheme for the mis-selling of IRHPs, or interest rate hedging products, otherwise known as swaps. In a number of ways, the results were welcomed: the company found over 90 percent of sales to “non-sophisticated” customers did not comply with regulatory requirements, such as the COBS Rules. In addition, the FCA noted that most of these sales have the chance to result in redress to the customer.

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Interest Rate Swaps : FCA Fair & Reasonable Redress

The regulatory failings of bank interest rate swaps have left thousands upon thousands of disgruntled customers looking for redress. Fair and reasonable redress, including consequential losses, by the banks and the FCA helps put customers in the same position they would have been in if the regulatory failings had not occurred.

The exact definition of fair and reasonable redress is malleable as it varies from case to case. In each case, the testimony of the customer and the evidence is reviewed by an independent reviewer to determine the appropriate redress. Therefore, when discussing fair and reasonable redress, it is important to have an understanding of basic redress and consequential losses

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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.