UK banks must pay out in new mis-selling scandal
LONDON (Reuters) - Britain's four biggest banks have agreed to pay compensation to customers they misled about interest rate hedging products, following an investigation by the financial regulator.
The Financial Services Authority said on Friday it had reached an agreement with Barclays, HSBC, Lloyds and RBS to provide appropriate compensation following an investigation into the mis-selling of the products.
The FSA said it found evidence of "serious failings" by the banks and added: "We believe that this has resulted in a severe impact on a large number of these businesses."
The finding by the FSA of mis-selling could lead to compensation claims ranging from many millions to several billion pounds from small companies who bought them.
It is the latest in a string of mis-selling cases that have plagued the financial services industry for over two decades. Banks are already set to pay upwards of 9 billion pounds ($13.96 billion) in compensation to customers for mis-selling loan insurance.
The news will compound problems for a sector that was hit hard on Thursday by news of a record $450 million fine levied on Barclays for rigging interest rates.
The FSA said the banks had agreed to compensate directly those customers that brought the most complex products.
The products range in complexity from caps that fix an upper limit to the interest rate on a loan, through to complex derivatives known as "structured collars" which fixed interest rates with a bank but introduced a degree of interest rate speculation.
The banks have agreed to stop marketing "structured collars" to retail customers.
The size of the likely compensation was not disclosed but Lloyds issued a separate statement saying it did not expect the financial impact from the settlement to be material.
Michael Brennan at Bracewell Law, which is acting on behalf of some of the small companies that sold the products, said there are likely to be around 4,000 claimants with total claims of 3-6 billion pounds though there are no hard figures so far.
(Reporting by Matt Scuffham; editing by Sophie Walker)
- Tweet this
- Share this
- Digg this
- With no sign of missing plane, search spreads far across land and sea |
- Malaysia military source says missing jet veered to west |
- Ukraine appeals to West as Crimea turns to Russia |
- Front companies, embassies mask North Korean weapons trade - U.N.
- Netanyahu, showing seized rockets, says Iran fooling the world