The sales of interest rate swaps are being reviewed by MP’s and peers. This type of hedging product is under scrutiny, and the future purchases of an over-the-counter interest rate swap may be limited. The FSA staff are currently reviewing the way derivatives of this type are being sold to small businesses. A compensation plan for businesses who bought interest rate swaps is being developed.

There have been several lawsuits from small companies that have complained that interest rate swaps were mis-sold to them. The lawsuits contend that fixed-rate small business loans contained derivative interest rate hedging products. The small businesses complained that the derivatives were mis-sold, not explained to them appropriately, or were not necessary for the loans offered.

OTC DERIVATIVES & Interest Rate Swaps

The interest rate swap is the largest component of the global over-the-counter (OTC) derivatives market. The amount of money outstanding after the numerous sales of interest rate swaps is in the trillions. This type of banking product has grossed a market value in the trillions. Interest rate swaps are currently being traded as an Index on the global futures trading stock exchanges.

SINCE 1988

An audit commission was contacted in 1988 regarding various transactions at Goldman Sachs and the interest rate swap products being traded. The commission began a study of this issue and began an investigation. The contracts in question were eventually determined illegal, and various appeals by the many banks concerned were not successful. Recently various banks have settled many of the mis-selling cases out of court. The one case that has recently been taken to a trial procedure was dismissed based on insufficient evidence. There are several cases outstanding, and the FSA continues to look into all complaints regarding this type of matter.

CULTURE AND ETHICS

The following are several constructive results from the control of derivatives to small businesses:

1. The FSA has begun an investigation regarding the sale of hedging products to small businesses.

2. The potential control of this type of hedging may result in a limited market for derivatives purchases.

3. A report regarding the culture and ethics at major banking lenders is being developed. This report is a study in the mis-selling of hedging products to small businesses.

4. A culture and ethics report may include various methods of sale for an interest rate swap. Issues concerning the full disclosure of information regarding this type of banking product are being studied. Full disclosure of product information may be a constructive result.

5. The commission on banking standards may restrict the sale of hedging products to small businesses. The full disclosure of the various risks associated with this type of product may be probable.

6. Authorization to use an interest rate swap product during the course of a loan offer may be studied. This type of authorization concern may produce a limited sale of derivatives to small businesses. There is a possible elimination of this type of sale to small businesses.

 

 

Previous Sales

The commission on banking standards is currently assessing any compensation due to the previous business loan customers. Several business loan customers have brought civil suits against the banks that loaned out business funds with additional interest rate swap derivatives products. The lawsuits are contending that the business customers were sold interest rate products that were unnecessary. The lawsuits are saying that these products were sold without a full disclosure of what they were. The business loans had derivatives that were purportedly not necessary and eventually lost money for the companies.

Proper Goals

The next few weeks are set to begin various studies about the appropriate direction for this type of derivative. An interest rate swap continues to be the largest component of the global OTC financial market. There are numerous outstanding interest rate derivatives on the market. This financial market is valued to be in the trillions for the banks involved. The bank of international settlements is reporting that the interest rate swap is the largest component of the over-the-counter derivatives market.

BRITISH LEGAL AUTHORITIES

British legal authorities have declared several of these hedge fund contracts illegal, and there have been appeals processes that have recently failed. Five banks involved in the interest rate scandal have reported to have lost millions. There have been many audits of the loan accounts that were involved in any small business mis-sold derivative. The MP’s have begun to be involved in the limitation of this type of hedging product. Small businesses have complained about purchasing banking loan products that they did not understand or were unaware of. The FSA has begun an extensive review of this financial market and its involvement with any small business loan. The new year has been set as the time frame for a final report on this financial matter.

Interest Rate Swap News

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?

The UK has changed its primary financial regulatory agency and made new rules. In November 2013, there are promises for letters dealing with consequential loss from interest rate swaps. Here are the details and what you discover when you “read between the lines.”

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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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FCA: Interest Rate SWAP redress set to Increase

One of the biggest scandals to affect the financial industry in recent decades has been the rise to prominence, and subsequent crash, or interest rate swaps and related securities. In a period of stock marketing trading and banking practises that were generally less regulated than in earlier eras, these products played a central role in boosting consumer fortunes and building up economies both in the United Kingdom and around the world. Their subsequent fall from grace led to one of the biggest financial crises of the last half-century.

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Interest Rate SWAP Claims

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

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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.