Full scale of swaps scandal comes into focus

With bank reporting season getting into full swing, the scale of the interest rate swaps mis-selling problem is becoming clearer, according to a claims specialist.

Since AccountingWEB last reported on the issue in November, there have been a number of legal and other updates in the area, including the FSA’s pilot findings on interest rate hedging products and negotiations between MP Guto Bebb and the banks that sold the arrangements to small businesses.

Daniel Hall of Treasury product claims specialist All Square Treasury said the industry was “finally waking up”.

“Banks are now making material provisions, with Barclays increasing theirs to £850m and RBS expected to increase theirs to £1bn, bringing industry provisions to around £2bn,” he said.

“These figures could have been much higher had changes to the FSA review scheme not been reduced.”

 

Continued...

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Comments

"Waking up"?

evanowen | | Permalink

As a claims manager I have been well aware of the full extent of this 'scandal'.

I feel sorry for those who have been bankrupted, how do you reinstate them even if it was the bank who did the dirty deed?

listerramjet's picture

oh dear

listerramjet | | Permalink

what happened to caveat emptor?  We are becoming a nation of lemmings!

Trust??    1 thanks

trecar | | Permalink

I still cannot understand why the banks even went down the interest rate swaps road. It must surely have come up in the risk register as a disaster waiting to happen. Even if there had been no mis-selling surely the thinking should have embraced the lack of financial skills that were present in what is essentially a sophisticated financial product. It is undoubtedly a case of greed turning governance blind to excess. Those at the top of the food chain have some very embarrassing questions to answer and need to come up with some very convincing explanations if they are not to render themselves liable to action for gross mis-management.

Factoring    2 thanks

kim walsh | | Permalink

How many of us have clients who have been forced by banks to factor their debts under threat of withdrawal of overdraft facilities or the promise of lower borrowing costs to watch those same clients teeter on or fall into insolvency with huge fees and complicated exit conditions?

Their stock reply when challenged is 'no one forced them, they should have read the contract before signing'.

True, but how many are able with a loaded gun at their head?

The banking industry is shameful.

 

listerramjet's picture

so answer the questions you raise

listerramjet | | Permalink

so how many clients do you have to whom this applies?

Structured swaps are a

mikebeadle | | Permalink

Structured swaps are a problem. But let's not forget that a vanilla interest rate swap is less complicated than a standard insurance contract and no self-respecting businessman should claim they were missold one of these.