UK banks slow to compensate firms for swaps mis-selling
By Matt Scuffham
LONDON (Reuters) - British banks have paid out only a fraction of the 3 billion pounds ($4.85 billion) they set aside to compensate small firms mis-sold complex hedging products, drawing criticism from businesses and the financial watchdog.
The country's biggest banks have run into trouble with the regulator over the mis-selling of these products and they have also had to set aside more than 16 billion pounds ($26 billion) to compensate retail customers mis-sold loan insurance.
"Progress to this point has been slower than expected. Many customers have been waiting too long to find out if they were mis-sold, some for more than six months," the Financial Conduct Authority said on Friday.
The interest rate swaps were designed to protect smaller companies against rising interest rates but when rates fell, they had make large payouts running to tens of thousands of pounds.
The review of interest rate swap mis-selling, set up by the FCA, formally began in May after a pilot scheme. The regulator had said firms would be compensated within 6 to 12 months but the process is now expected to drag out for longer even though banks have taken on more than 2,800 staff to handle the cases.
The banks paid 1.5 million pounds in compensation in September with 22 offers being accepted by customers, the FCA said. This brings the total the banks have paid out to just 2 million pounds since the regulator ordered a review of nearly 30,000 cases last year.
The lack of progress has angered small businesses, many of which face crippling monthly repayments and hefty break-up fees to disentangle themselves from the arrangements.
"The fact that only 22 SMEs accepted offers last month shows the unacceptably slow performance of the banks providing satisfactory redress to those mis-sold," said Abhishek Sachdev, managing director of Vedanta Hedging, which advises companies on the products. "We are aware of some SMEs that have been waiting for 12 months since their review meeting with the bank." Continued...