Certain interest rate hedging products (IRHPs) have come under question by current banking customers and by several banking agencies within the U.K. These banking products are structured collar financial products that are frequently used to hedge against future interest rate expenses. These complex structured collars were sold to numerous loan customers during the period of time before the great international recession. This financial downturn across the international financial markets created unusual interest rate returns for many of the structured collars sold to Barclays Bank customers.
Barclays Bank: Fair & Reasonable Redress
Sophisticated and Non-Sophisticated Customers
The end results for the customers of Barclays Bank who purchased these interest rate swaps were mixed. The sophisticated customers were able to absorb the expected financial losses and recover within a reasonable time frame. The non-sophisticated customer or smaller business customer suffered significant loss and has been unable to recover from purchasing these interest rate hedging products.
Who Are the Sophisticated Customers
The sophisticated banking customers tend to have the following internal and structural characteristics within their respective companies:
1. The companies are larger and have a more complex internal business structure.
2. These larger companies tend to have the specific expertise to understand all of the risks associated with the interest rate swap products.
3. The sophisticated companies have the resources to recover from a major financial downturn.
4. One financial product with associated risk can be absorbed into the larger company’s financial portfolio without a destructive penalty.
Who Are the Non-Sophisticated Customers
The non-sophisticated customers tend to be of a certain description, and the characteristics of this type of Barclays customer are the following:
1. Barclays Bank has indicated that certain non-sophisticated customers are eligible for reimbursement for the interest rate swap products that were sold to them.
2. The banking regulators involved with the IRHP complaints have been selected for a general overview analysis of each Barclays Bank customer who has purchased these interest rate products.
3. The non-sophisticated customer is being helped with their interest rate purchases because of several legal reasons. One of these legal reasons involves the lack of knowledge about the relevant risk of an interest rate swap product.
4. The non-sophisticated company is usually smaller and does not have a large and complex financial portfolio that can absorb any failing financial losses.
Barclays Bank and a Fair and Reasonable Redress
Barclays is interested in providing a fair and reasonable redress for the non-sophisticated financial customer and for certain structured collar hedging products that qualify for a refund or redress. There are certain qualifications for redress that have been approved by the appointed banking regulators for the many complaints. The Financial Conduct Authority and the Prudential Regulation Authority are currently in charge of any complaints about the interest rate swap products. Each complaint is reviewed by these regulatory agencies to determine the value of the complaint and to provide any release of funds for a fair redress.
An Independent Reviewer
Barclays has appointed an independent review team to look over the many complaints filed against their IRHP products as well. The firms of KPMG and Deloitte are currently reviewing each complaint for its viability and for the value of any refund sent out for a past purchase. Customers who have been classified as non-sophisticated are being reviewed. Sophisticated customers have been sent a notice of their status, and any redress may have separate avenues of redress.
The Barclays Non-Sophisticated Customer and Factors for Consideration
There are several factors that are being taken into consideration regarding the interest rate swap complaints filed with Barclays. The non-sophisticated customer may have several of the following factors considered as mitigating reasons for a refund redress, and these factors are the following:
1. A refund or redress may be possible for a non-sophisticated customer who has unexpectedly been damaged by an IRHP product. This type of Barclays customer may have a current and severe risk of insolvency.
2. This type of customer may have severe creditor pressure or serious cash flow issues.
3. A receiver for the company assets may have been appointed, or a letter may have been issued by a current bank about the company’s financial severity.
4. Current liquidators or administrators may verify the financial damage that has occurred for a non-sophisticated company.
Barclays has agreed to not foreclose on any current lending products until the IRHP matter is resolved. The review process involves an initial in-scope letter, a fact finding process, a decision process, a customer meeting to present the review information, and a closure and redress offer. Customers who purchased a structured collar are a part of an ongoing review by government regulators and private banking officers. Certain regulatory standards are required, and the amount of the redress is being monitored by government and private officials.
Interest Rate SWAP News
Preparing Businesses for an Interest Rate Swap Claim
The interest rate swap mis-selling fiasco has garnered a lot of attention during the past year. Over 12 months after the first cases went up for review, the claimants are just now receiving the compensation they deserve. Although it may seem like businesses around the country are now experiencing financial windfalls, there is much work that needs to be done before anyone can expect to receive compensation from their interest rate swap mis-selling claims. It has become quite clear that the process is much more involved than a PP mark-II.
Interest Rate Swaps: Natwest Bank, Fair & Reasonable Redress
Natwest Bank in London has begun a direct redress program for those small businesses affected by several interest rate swap products. These interest rate swap products or structured collars were sold to small businesses as a hedge against any risk associated with the interest rate markets. The small businesses or unsophisticated businesses were allowed to purchase these products. The 2008 financial crisis caused many of these hedging products to be of little value against interest rate changes. Small businesses were left with a financial bill that was significantly burdensome.
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.
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 very 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 redress.
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
Latest posts by Tim Capper (see all)
- PPI Claims Currently Show No Sign of Slowing Down - December 10, 2014
- Swaps (IRHP) Determining the Level of Redress - November 3, 2014
- FCA updates PPI redress for 2.5 million old PPI complaints - October 27, 2014