FSA Reveals Scale Of New Mis-Selling Scandal
Britain's biggest banks could be facing a bill running into billions of pounds for the latest mis-selling scandal to hit the industry.
The city regulator, the Financial Services Authority, has been investigating interest rate swaps, a complex financial product which was supposed to protect businesses against rising interest rates.
Instead, they left many customers in dire financial straits with heavy debts.
The FSA has revealed that more than 90% of interest rate swaps were possibly mis-sold to small businesses.
On Wednesday, Sky News City Edtior Mark Kleinman revealed that the City regulator had set out a revised framework for small business enterprises (SMEs) to pursue possible redress.
The swaps were traditional variable rate loans combined with complex interest rate movement bets that were sold on by banks' investment divisions for massive profits.
The unregulated swaps were promoted as a type of insurance at "no cost" to shield small businesses against adverse interest rate changes, but subsequently became major liabilities.
Britain's scandal-hit banking industry now faces another hefty compensation bill after the review of the complex products.
The FSA said a significant proportion of the 173 cases examined were likely to result in redress being due to the customer.
The potential scale and cost of the new scandal comes in the wake of mis-selling of payment protection insurance - known as PPI - to homeowners.
Banks have prepared to payout more than £10bn over the PPI scandal.
It is thought that as many as 40,000 of the interest rate swaps could have been mis-sold to small businesses since the end of 2001 after the FSA highlighted "serious failings" in the sale of the products last summer.
The FSA announced that the UK's four big banks - Barclays, HSBC, Lloyds and Royal Bank of Scotland - have agreed to start work on reviewing individual sales and providing compensation.
The FSA has also been reviewing sales of swaps by Allied Irish Bank, Bank of Ireland, Clydesdale and Yorkshire banks, the Co-Operative Bank, and Santander UK.
It expects to confirm by February 14 that these banks can launch their own reviews.
Martin Wheatley, chief executive designate of the Financial Conduct Authority, said he hoped the FSA's actions will ensure a fair and reasonable outcome for small and unsophisticated businesses.
He added: "Small businesses will now see the result of the review as the banks look at their individual cases.
"Where redress is due, businesses will be put back into the position they should have been without the mis-sale. But it is important to remember that this review is firmly focused on the particular circumstances of each sale.
"These will determine whether there were failings in the sales process and, if so, whether redress is due."
It is thought the cost of compensating businesses could total as much as £1.5bn across the sector, with Barclays, HSBC and RBS having already set aside around £630m to cover potential claims.
The FSA has now released new guidelines for banks to differentiate between sophisticated firms that knew what they were buying and small firms which did not understand the products.
what do you think?
Oh no, now that means countless unwarranted recorded call to private house phones and another batch of adverts saying "have you you been mis-sold......."!!! No wonder the population don't trust banks!
Nothing has changed since 2008. Banks, politicians, big corporations - all still as corrupt and immoral as before. Capitalism makes slaves of us all
So this is the Finance Capital that we must protect,one of the main reasons why we should not leave the EU,so like every other bit of dog mess that comes out of the Government, so wow surprise thats been misold etc etc,surprise you all got conned on a global scale ,but no worries on your job front or being arrested for it,your a Banker immune from anything except for being responsible for putting millions on the dole losing there homes etc to the wall with them
Basic Finance ought to be part of the National Curriculum. Topics like Opening a bank account , the difference between a Standing Order and a Direct Debit, Basic Taxation, Loan finance, keeping financial records etc And remember ..... like in rape NO means NO!
A few years ago the Bank Manager used to be thought of as an upstanding member of the community. These days they are looked on as spivs, somewhere between a dodgy car salesman or Estate Agent an an MP - with good reason in my opinion.