According to the research published by Manpower, British Banks have created an estimated 20,000 new jobs to deal with Payment protection insurance claims and Interest rate swap claims. These jobs are solely to service the large amounts of compensation claims made against the Bank.
Mis-Selling Derivatives and PPI Scandals Create 20,000 UK Jobs
The mis-selling of payment protection insurance and interest rate hedging products has created 20,000 jobs in the UK after Britain’s biggest banks became inundated with claims for compensation.
According to research by employment group Manpower, published on its website, 20,000 new jobs have already been created by the big banks alone for the sole purpose of servicing PPI claims, and this figure does not even factor in the posts created by the various Claims Management Companies which aid customers seeking compensation.
“With around 600,000 new jobs created in the last year alone, you’d think the UK employment phenomenon must surely be coming to the end of the road, but the good news looks set to continue till at least the summer,” says Mark Cahill, UK Managing Director, ManpowerGroup.
“On face value you’d think we were in the midst of a boom but many of the jobs created here are the direct result of the mis-selling of PPI and Interest Rate Swaps. These scandals have spawned a new industry to deal with the fallout,” adds Cahill.
On 8 March, the Financial Services Authority revealed that UK banks have paid nearly £9bn (€10.3bn / $13.4bn) over the past two years to compensate customers mis-sold PPI, in what has become the most expensive financial scandal in British banking history.
Only a few days earlier, the Financial Ombudsman Service (FOS) said that during the last six months of 2012 new complaints rose by 110 percent, reaching a record total of 283,251.
In data published on the ombudsman’s website, the FOS added that complaints about PPI made up nearly three quarters of the total for the second half of last year, bringing the total amount of complaints to FOS about PPI to 600,000.
Banks have accelerated their recruitment drive to deal with PPI mis-selling claims. Indeed Lloyds has revealed it has employed 6,000 people to process these cases.
In mid-January this year, IBTimes UK reported that the Financial Services Authority and the banking industry are considering implementing a deadline for PPI mis-selling claims in order to slow down the backlog in disputes and billions of pounds in payouts.
“Despite attempts to put a lid on the amount that the banks pay out on PPI, within the last month alone, we have seen big names like Barclays and Lloyds massively raise the amount of money set aside to deal with PPI claims. A whopping £11bn pounds has already been allocated, and some commentators think that number could easily double. The consequence of this will not only mean cash in people’s pockets, it will also translate into jobs,” says Cahill.
While Manpower placed PPI and mis-selling interest rate swaps into the same category, the financial products are very different.
Unlike the uniformity of the settlement process in the PPI scandal that has afflicted millions of British savers, small business interest rate derivatives vary in length, value and purpose, making them unsuitable for collective action or settlement.
Interest rate swap agreements, or IRSAs, are contracts between a bank and its customer where typically one side pays a floating, or variable, rate of interest and receives a fixed rate of interest payments in exchange.
They’re used to hedge against extreme movements in market interest rates over a given period.
Companies which saw the value of these products move against them as rates fell during the recession now owe banks crippling sums of money in interest payments each year.
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