The new Financial Conduct Authority (FCA) has taken on an important test case concerning the mis-selling of Royal Bank of Scotland (RBS) interest rate swaps. A court has already sided with RBS. Now, the case has been moved to the Court of Appeals. With record low consumer confidence in banks, it is very important to see how the FCA handles this High Street bank.

Interest Rate Swap Mis-selling Case

“Important Test Case for New Regulatory Agency”

On 1 April 2013, the Financial Conduct Authority replaced the Financial Services Authority. The FCA has the duty of regulating the conduct of retail and wholesale financial institutions. It has the power to establish rules and can fine banks for inappropriate activities. One of the problems is that many of these mis-selling cases are very old.

Consumers have begun to realise that something is seriously wrong with the banking industry. Why should cases from 2005 still be argued in court rooms in 2013? The credit crunch continues to weigh down the economy. Many consumers question whether the London banks have been penalised sufficiently.

The City of London remains the banking capital of the world with the highest concentration of powerful financial institutions. The revolving door between private banks and public regulatory agencies has created a dangerous “conflict of interest” as associates are expected to police associates.

“RBS Interest Rate Swap Case Appeals”

In 2005, RBS sold Paul Rowley and John Green an interest rate swap. Rowley claimed the swap was mis-sold. RBS won the case by proving it had properly explained the risks involved.

The Court of Appeals was to hear the case in October 2013. The FCA has stepped in to review the matter. Mr. Rowley viewed the FCA intervention favourably. Already, the FCA has asked the court for the explanation of rules.

“Admitted LIBOR Manipulation”

Scandal after scandal has rocked the banking community. After the credit crunch and mis-sold litigation, the High Street banks – Barclays, HSBC, Lloyds and RBS – admitted that they had been manipulating LIBOR since 1997. Virtually all adjustable-rate investments globally had been pegged to LIBOR. This manipulation has opened the door to further litigation.

“Judge, Jury and Executioner?”

If RBS was manipulating LIBOR while selling customers interest rate swaps, isn’t there an obvious conflict of interest? It would seem so. The FCA may take this into consideration.

More consumers are seeing the banks as judge, jury and executioner. Instead of being punished for misbehaviour, the banks were given bail-outs. Why would any entity reward mis-selling? It only makes sense if the banks control the government. “All men justify themselves” and a bank-run government will not punish criminal bankers sufficiently.

“High Street Banks Set Aside Funds for Mis-Sold Liabilities”

Barclays has set aside £850m and HSBC has set aside £130m for mis-selling financial instruments litigation. The Royal Bank of Scotland will increase its compensation fund from £50m to £1bn. There are still questions over the final cost of this litigation.

“Follow the Money”

The FCA has a difficult task due to the ongoing distrust of banks by the consumer. According to” in 9 August 2012, consumer confidence in banks hit an all time low. A survey showed that 71% of Britons don’t believe UK banks had been penalised enough. An estimated 80% blamed the tight-knit “banking culture” with its overlapping private and public sector connections. The next banking crisis may be worse because no real changes have been made according to 84% of Britons.

These are some of the reasons for low consumer confidence in High Street Banks:

1) Record banking profits

2) Debtors going bankrupt

3) Continued credit crunch

4) Very small financial fines

5) No real jail time for bankers

More people think the UK government is merely “shuffling chairs around.” The wealthy regulators refuse to punish their “mates” in the High Street banks.

The FCA has a tough path ahead due to ex post facto laws. Its hands are tied since the laws in place during the credit crunch favoured the banks. Any FCA action is more likely to involved making more rules. But will the consumer be satisfied with more banking rules?


Maple Financial Interest Rate Swap Claims

We 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 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.  Maple Leaf Financial will review your interest rate product and we will be happy to discuss your individual concerns and requirements : 0800 7747624


The following two tabs change content below.

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.