Banks who sold complex insurance products could possibly be fined by the Financial Conduct Authority. The deals were intended to protect the borrowers from rising interest rates. However, many businesses saw their payments increase drastically with the interest rates at a historic low.
FCA: Interest Rate SWAP & Bank Fines
The Financial Conduct Authority, or FCA, set up a redress scheme to review 30,000 interest rate swap mis-selling cases in July 2012. However, only 32 percent of the businesses have received compensation as of today. Many businesses have stated that they were pressured into purchasing the insurance products. They were told that they could not get their loan without taking out the swap deal. In many cases, the businesses were not given enough time to make a final decision.
Michael Whelan and his wife Katherine have been running Kites Nursery for five years. He has stated that he did not even know about this type of product. In fact, he did not even know what a swap was.
Michael and his wife would have to pay 12,500 pounds to release themselves from the deal according to figures from Barclays. However, Michael stated that they received a 100,000 pound quote. He has stated that his life has been ruined for the past five years. He worries so much that he cannot sleep without medication.
Barclays has stated that they have suspended Kites Nursery’s payments. The bank added that Kites Nursery had responded to their invitation to give their account of the sale. The bank has stated that they are working with an independent reviewer and are working to rectify the mistakes that they have made.
BBC Panaroma has spoken with someone who has had over 40 years of experience working in the banking industry. He did not want his name released, but he stated that the scandals have been driven by big bonus. He also stated that the banks were selling insurance products to people who did not completely understand them.
The sales of the products were distorted and aggressive. The bonus a bank received was linked to the profit they were able to generate. Things were being pushed by the senior management.
Martin Wheatley is the chief executive of the FCA. He has stated that the mis-selling of products has become a cultural problem. He also stated that the moral compass in banking has been lost. Wheatley believes that the moral compass was lost sometime between the period of 2005 and 2008.
Furthermore, Wheatley stated the FCA has considered issuing a fine to the banks after the redress scheme has been closed. In many cases, further action will need to be taken. Right now, the FCA is not worried about taking further action. They are focused on helping people get back their money.
Interest Rate SWAP News
Interest Rate SWAP victims
Interest rate swaps is a type of insurance policy offered to firms by banks if the interest rates fluctuated to their disadvantage. As firms took loans between the year 2001 and 2008, most of the financial institutions offering loan services had in place this insurance cover. The only loop hole with swaps was that it didn’t explicitly define the extent to which the cover was to go on the occurrence of the event. The policy used to avoid including extreme events in the contracts in order to sell more policies as well as maintain their customers.
Only 22 Businesses Compensated over Interest Rates Swaps
Banks are slowly but surely compensating small firms that have been mis-sold interest rate swap products. Firms have been waiting six months to get compensated. The Financial Conduct Authority, which is also known as the FCA, has stated that the progress has been much slower than they had anticipated. In September, only 22 got redress. There have been over 30,000 cases reviewed.
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.
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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