Banks have paid out just £500,000 in compensation to businesses mis-sold swaps out of a potential bill of £2.5bn more than a year after regulators set up a redress scheme for victims of the scandal, figures published by the FCA show, reports The Telegraph.

Only 10 businesses have so far accepted compensation from their banks, though the Financial Conduct Authority (FCA) said thousands more offers would be sent out by lenders in the near future.

FCA swap mis-selling scheme pays out just £500,000 in compensation

Only 10 businesses have so far accepted compensation from their banks, though the Financial Conduct Authority (FCA) said thousands more offers would be sent out by lenders in the near future.

The figures mark the first time the FCA has revealed detailed figures on its interest rate swap redress scheme, which was set up in June 2012.

According to the data released on Wednesday, 30,169 products have been reviewed by the nine banks signed up to the scheme, of which half have been deemed eligible to take part in the process.

Of these potential claims, 1,385 were identified as “Category A Sales”, meaning the product sold to the business is automatically determined to be too complex leading to an immediate offer of redress.

A further 13,704 sales were classified as either “Category B” or “Category C”, comprising more simple products. Of these claims, 93pc have so far been found to be “non-compliant” with the regulator’s rules, meaning customers are likely to receive some form of compensation.

 

Martin Wheatley, chief executive of the FCA, said the long time taken to get the review going was due to the “complexity” of the process, but insisted many businesses would have compensation offers before the end of the year.

“With a process like this it was important to get things right and we have worked hard to ensure the scheme deals as fairly with people as possible,” said Mr Wheatley.

Responding to criticism that many businesses were being told by their banks they would not receive compensation payments unless they agreed to settle claims over so-called consequential losses, Mr Wheatley said he agreed with this approach.

“It is right that this should be dealt with in one go. The last thing we want are cases rattling along for years,” he said.

Banks currently have 2,800 staff working on the review process and more than 5m documents have been reviewed. The bank have set aside £2.5bn to cover compensation claims.

The figures show RBS is far behind the other banks in the redress process with 4,602 cases still at the “sophistication assessment” stage, compared to none at Barclays and less than 900 at Lloyds.

The taxpayer-backed lender has also seen many more of its customers sign up to take part in the scheme than its rivals, with 3,266 opting to go through the compensation process.

By contrast, Barclays had the second highest number at 1,172, while HSBC saw 1,069 customers opt to take part and Lloyds 785.

The scale of RBS’s exposure is likely to put pressure on the bank to dramatically increase its provision against the cost of the scandal.

Telegraph Article


Interest Rate Swap Mis-Selling: News

Mis-sold Interest rate swap business recieves payout

The interest rate swap scandal has been one of the bigger scandals of the British financial systems, with many large banks such as Barclays and Lloyds ordered to compensate victims of the mis-selling of interest rate swaps. Interest rate swaps are essentially the exchange between counterparties of a fixed interest rate with a floating one. They are used primarily in businesses as a hedge against changes in the interest rate. However, an unforeseen consequence of these products were substantial losses due to falling interest rates, something that regulators believe buyers of the product were not properly informed about. Despite being ordered to issue compensation to victims of the mis-selling over a year ago by financial regulators, banks have only recently made the first payment towards victims of the mis-selling scandal.

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what are Interest Rate Swaps and their Mis Selling

An interest rate swap  (IRS) is a financial derivative product that consists of the profits from interest rate instruments. Professionals who are working in the hedging or speculating areas of finance often find these products attractive.

Essentially, two parties exchange interest rate cash flows, and the agreed upon contracts will specify the details of these exchange transactions. Hedging and speculating can be made more palatable with an additional product such as the IRS. The IRS will give more of a safeguard against a volatile market. Investing in interest rate behaviors often will soften a loss or add to a gain by either party. This type of product is similar to an insurance or assurance of a lesser kind of loss.

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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.