With payouts for Britons who were mis-sold interest rate swap products reaching £158.6m in December, Barclays, Lloyd’s, HSBC, and Royal Bank of Scotland have increased their compensation approvals for those affected by the mis-selling of complex financial products, the latest Financial Conduct Authority figures reveal.
Interest Rate Swap Mis-Selling Costs
The FCA’s latest figures are based on mis-selling claims that were paid out at the end of December. By August of last year, banks had only paid out £500,000 in claims, with the compensation figures reaching £81.2m by the end of November.
However, according to the FCA, the amount paid to claimants nearly doubled in the month of December as they approached £160m.
Although the redress figure is climbing rapidly, it only represents a fraction of the £3bn appropriated by the major lenders to be used for the compensation of their victims, although this figure also includes expenses for the scheme’s administration.
The one month jump in compensation reviews comes on the heels of the FCA’s written requests to the chief executives of Barclays, Lloyds, HSBC, and RBS, urging them to speed up the pace of compensating victims of their interest rate swap products.
Martin Wheatley, head of the FCA, has stated that the compensation delays only compound the injustice of selling a complex financial product to companies that lacked an understanding of the risks involved, which left many of them struggling to make ends meet.
In total, there were 18,700 cases related to the interest swap fiasco that the banks were ordered to review. With little being done throughout most of 2013, the FCA set a much more positive tone when it released its latest monthly update on the scheme.
It said that by the end of December, 1,040 compensation offers had been accepted by victims, which was 493 more than the total number through November.
While 1,040 have been granted compensation, 672 have been denied redress. Currently, there are 7,500 customers still in the investigative phase of the redress process.
According to Clive Adamson, the FCA’s director of supervision, “Banks have picked up the pace since November; we asked that they focus their efforts on making far more rapid progress in assessing individual cases and crucially in providing redress.”
“May remains the target for all offers to have been sent out and the banks involved are working towards that. Any affected business that has been invited to join the scheme and hasn’t needs to act now so they can receive the redress they’re due,” he continued.
Anthony Browne, chief executive of the British Bankers’ Association, echoed Adamson’s remarks, stating, “Anyone who wrongly suffered as a result of having been mis-sold an interest rate hedging product will get appropriate and fair redress. Banks are working hard to complete the reviews and, as the regulator notes today, the process is speeding up.”
As compensation for those deprived of their hard-earned money, in addition to their redress payments, the banks have agreed to pay victims 8 percent interest on the payments as well.
The FCA began its review of controversial interest rate swaps in January 2013, after it was determined banks mis-sold the products to thousands of small and medium-sized businesses.
The banks vowed to provide all potential victims with a redress determination within 12 months of beginning their reviews, setting a deadline of May of this year.
According to the FCA, there are 3,700 remaining customers who have still not opted in to the compensation scheme, which has led banks to issue final reminders in an effort to encourage them to participate.
Banking Consultant Mehrdad Yousefi proclaimed, “The true cost of the misselling is not the compensation but that companies have actually lost their livelihoods as a result. It is much more difficult to put a value on that impact. Given the variety of misselling scandals in recent years one would hope the banks know the scale of the problem and rectify it accordingly.”
Of the major banks, Royal Bank of Scotland has the most interest rate swap sales cases to review as it must tackle over 9,000 cases. HSBC and Barclays follow with 3,000 cases that must be reviewed by each bank. Meanwhile, Lloyds must review nearly 2,000 sales of interest rate swap products.
News for Interest Rate Swaps
Interest Rate Swap Could Have Twice As Many Victims
The three billion pound loan swap scandal where businesses were mis-sold interest rate swap products by banks has been making headlines for the past couple of months
FCA needs additional powers to extend interest rate swap redress
The Financial Conduct Authority (FCA) was formed nine months ago as a successor to the Financial Service Authority (FSA), which regulated the British financial services industry during the twelve years of its existence.
Banks Lose Legal Battle, Swap Compensation Claims May Rise
Barclays and Deutsche Bank have recently been designated defendants in civil lawsuits filed by current lending customers. The banking institutions previously intiated an independent review of their loans that had included an additional insurance product called an interest rate swap.
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.
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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