LESS than 40 per cent of the £4 billion bill set aside to compensate businesses mis-sold complex rate swaps has been paid out by Britain’s big banks, figures out yesterday revealed.
The Financial Conduct Authority (FCA) said £1.54bn in compensation had been paid so far in 9,858 cases settled by four lenders – Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland. That includes more than £300 million to cover so-called consequential losses.
The products were designed to protect smaller firms against rising interest rates, but when those rates fell the companies faced large bills, typically running into tens of thousands of pounds.
Businesses also faced penalties to extricate themselves from the deals, with many claiming that they had not been made aware of the penalty clauses.
Last year, the financial regulator ordered banks to review 29,500 cases for possible mis-selling after finding “serious failings” in how the products were sold.
However, banks dismissed more than a third of the cases, with the customers being deemed sufficiently sophisticated to have understood what was being offered.
The FCA said that, in addition to the £1.5bn or so paid out in direct compensation to customers, the banks had set aside funds from the £4bn pot to meet the cost of closing the original hedging contracts. That covers the loss of payments customers would have made to banks under their hedging arrangements if they were still in place.
According to the data, RBS has examined 7,353 cases in the review, far more than any other bank. HSBC has reviewed 3,160 cases, Barclays 2,902 and Lloyds 1,638. RBS has set aside £1.4bn to compensate customers.