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.
Natwest Interest Rate Swaps: Redress
A Reasonable Redress
Natwest Bank has a current redress program in place, and this redress program for interest rate swap products is available for unsophisticated or small business customers. An unsophisticated customer is one who is unlikely to have specific expertise or an understanding of the risks involved with an interest rate swap.
Criteria for Redress
There are certain other criteria for redress that are currently in place for any small business Natwest Bank customer who purchased these financial products in question. The following are several of these criteria that need to be met:
1. The results of any of the interest rate swap products for the unsophisticated or unknowing small business include a severity risk of insolvency. This factor says that a small business is significantly affected by the structured financial product.
2. A severe creditor pressure may be a qualifying factor for an immediate interest rate product redress. A severe creditor usually means that there is one or two creditors who demand full payment, and there is no negotiation accepted from this creditor.
3. Serious cash flow issues are significant reasons to request that an interest rate swap be completed as soon as possible.
4. Receivers may be appointed for the small business accounts that may be in current default. There may be a letter of severity from a banking official indicating that recent accounts have cash flow pressures.
5. Certain correspondence from liquidators or administrators may provide proof that the small business has immediate financial concerns.
Redress Procedure for a Small Unsophisticated Business
Certain redress procedures may be involved in order to determine if a small business qualifies for an immediate redress, and these procedures include the following:
1. The interest rate swap product sales to these small unsophisticated businesses may be reviewed in order to qualify these sales by the current regulatory standards.
2. Any redress that is due is determined for each Natwest banking customer who has purchased any interest rate swap product.
3. Redress will be determined from the banking and bookkeeping information that is provided to the banking review officials.
4. Suspension of payments towards the hedging product purchased may be approved until the customer reviewing procedure is completed.
(See FCA Sophisticated Test & Flowchart below)
More Complex Products and Sophisticated Customers
More complex interest rate swap products were sold as well. A fair and reasonable redress may be due for these customers. A sophisticated customer is notified about a customer status and about any redress due to these businesses. An independent reviewer is used to determine the type of banking customer who has purchased an interest rate swap product or a more complex banking structured product. Sophisticated customers are those with the specific professional knowledge to know and understand an interest rate swap product and the risks involved with these banking products. Certain Natwest banking customers are classified as sophisticated and may not be included in any redress program.
Natwest Bank in London has several interest rate swap redress programs available for their current and past banking customers. The redress programs are set up for product reimbursements that began as a part of an interest rate swap sales campaign. Unsophisticated and small business customers claim that they were unknowingly sold these expensive packages as hedges against an interest rate market. Small firms have faced significant penalties to settle these accounts successfully.
FCA Sophisticated Test Flowchart
Interest Rate Swap : News & Information
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.
Interest Rate Swaps : Banks face property developers hidden claims upto £10bn
According to research published by DTZ a global property service company, Banks could face an extra hidden cost to property developers from interest rate swaps used by developers on commercial property portfolios around the country.
Thousands of property developers could be entitled to better lending terms and compensation over mis sold interest rate swap products between £5bn and £10bn. An estimated 1 in 5 commercial property developers could be eligible under FCA redress for mis selling of interest rate swap products.
Interest Rate Swaps: RBS exposed to new swap mis-selling
Investec reports that RBS is likely to be the next bank exposed to interest rate swap claims from mis-selling and should be putting extra provisions aside for likely calls for swap compesation.
After the FCA set up the interest rate swap rate redress scheme with the banking sector, only 10 claims have been compensated so date. RBS is the most likely big bank to need to put aside extra provisions to compensate customers for mis-selling of interest rate swaps, reckons Cityfirm Investec.
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
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