There were four big banks involved in the investigations surrounding mis selling of interest rate swap products to unsophisticated business customers. The banking institutions that were reviewed by Britain’s regulators included Barclays, HSBC, Lloyds and RBS.

The Banks, Business and Interest Rate Swaps Redress

What Were the Results of the Banking Regulators’ Investigations?

Investigations were begun after several complaints were filed against the four big banking institutions and additional financial services companies. Redress was begun to the unsophisticated customers within 12 months of starting the financial reviews of these banks.

What Were the Redress Results for the Banking Institution Customers?

The redress to the banking institution customers followed a report from the financial conduct authority. Redress currently paid has reached 306 million pounds and this redress pay out has almost doubled the amount previously paid out by December of 2013. There have been 9,000 customers in the redress phase as of January of 2014 and there have been 7,000 redress determinations completed.

What Are the Additional Results of the Banking Redress Investigations?

The current redress program has included small business accounts as well. The purpose of the banking redress program has focused on ensuring that the decision process affecting business owners remain on course and that the business owners affected are treated fairly. The initial offers of compensation for the small businesses should have their compensation out by the end of May 2014.

What Other Banks Are Paying Redress to Small Business Customers Affected by Mis Sold Interest Rate Swaps?

Additional banking institutions have begun to pay out redress compensation as well. These additional banking institutions include Santander UK, Clydesdale and Yorkshire Banks. Yorkshire Banks include the National Australian Group (Europe), Cooperative Bank, Allied Irish Bank of the U.K. and the Bank of Ireland.

What Financial Damages Have Been Incurred?

A small business loan was reported to have cost an 80 year old firm 1.5 million pounds because of interest rate swap agreements bought from the Royal Bank of Scotland. There are a reported 100,000 loans that have been indicated as mis sold by interest rate swap product contracts. Barclays Bank has set aside additional funds in the amount of 400 million pounds for compensation to small businesses that have been involved in the interest rate swap matter.

What Percentage of Agreements Have Been Determined as Mis Sold?

An FSA report has indicated that 90 percent of interest rate swap agreements issued may have been mis sold to small and unsophisticated companies. An unsophisticated company is a business that has been designated as not knowing and unaware that a product being purchased is mis sold. The shadow business secretary has requested that the financial services authority provide a fair resolution for small businesses who have been mis sold small loans.

What Additional Action Is Needed About the Interest Rate Swaps Scandal?

Small business representatives met with the financial services authority to request more of a transparent process following the mis selling interest rate swap resolutions. There is some concern that a significant delay may occur and that the resolution payments may be delayed in being processed. Thousands of small companies may have been involved in a bank product mis selling scandal. This possible level of involvement could create a payment protection insurance controversy.

What Is an Interest Rate Swap Product?

An interest rate swap product is the payment protection insurance product in controversy. An interest rate swap insurance protection was sold to thousands of small business loan customers before any decline in the credit markets began. These interest rate products were sold as a buffer against certain interest rate changes that could occur in a normal credit market. The financial and credit markets plunged in 2008 and many of the interest rate swap products sold became financially negative or toxic. This phenomenon caused many loans to small businesses to become due with additional and excessively high interest rates. The additional interest for these loan products was excessive and many of the small firms could not pay back their loans.
Thousands of small businesses were caught in the interest rate swap scandal and were unable to pay back their loans. This loan default problem created significant financial concern for thousands of small businesses. Several of the banking institutions that sold these loan interest rate swaps have agreed to compensate and relieve the debt of many of the small business banking customers. A delay in compensating unsophisticated customers created a current agreement to quickly pay out these customers.


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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.