Britain’s biggest banks have now paid out £482 million in compensation to small firms that were mis-sold complex interest rate hedging products, according to the City regulator.
The Financial Conduct Authority (FCA) said lenders were on track to meet their target of redressing firms within their 12-month deadline, but urged the 1,900 customers who have not yet signed up to the scheme to do so as quickly as possible.
Some 3,430 offers of compensation had been accepted by the end of last month, with an average payout of more than £140,500 – that compares with just £50,000 in August.
Interest rate swaps were marketed as protection against rising borrowing costs, but the financial crisis caused rates to slide and many firms faced stiff penalties to get out of the deals.
Banks have set aside about £4 billion to meet the costs of compensating customers, but the total figure could be much higher because of so-called “consequential” losses, such as lost interest and profits.
Daniel Hall, managing director of All Square, which advises companies pursuing claims, said: “We estimate that the final bill for consequential losses could be as high as £6bn.”
Banks have agreed to offer 8 per cent annual interest on top of any redress paid out to firms in a bid to speed up the process.
A spokesman for the FCA said: “For many customers, taking into account the economic environment over the last five years, this will represent a straightforward and fair alternative to putting together consequential loss claims, which are likely to take longer to assess.”
Royal Bank of Scotland, which has by far the largest amount of claims, has now made 3,159 offers of compensation, compared with 953 at fellow bailed-out lender Lloyds Banking Group.