LONDON (Reuters) - Britain’s banks have paid out 500,000 pounds to compensate companies for mis-sold interest rate swaps and the figure is set to rise rapidly in coming months, the Financial Conduct Authority (FCA) said on Wednesday.
The bill is the latest faced by banks, which are also compensating customers for mis-sold payment protection insurance (PPI). Two British banks have also been fined for manipulating the London Interbank Offered Rate, or Libor market benchmark.
Interest rate swaps were designed to protect smaller companies against rising interest rates but when rates fell, they had to pay large bills, typically running to tens of thousands of pounds.
The FCA said in its first update on how banks are responding to claims that by the end of August 10 offers of redress had been accepted by businesses totalling half a million pounds.
This figure is expected to increase rapidly over the coming months with 210 offers already sent out to customers and with a further 1,700 due to be sent shortly, the FCA said.
The banks have taken on 2,800 staff to review more than 30,000 cases and the FCA expects most customers will be told by the end of the year about the result of their review. More than 25,000 sales or 85 percent of the total are being assessed.
“With 85 per cent of cases now under review, banks have made progress. But like the thousands of affected small businesses, we want to see redress paid quickly to those who have suffered loss as the result of mis-selling,” FCA Chief Executive Martin Wheatley said.
Due to their complicated nature, redress offers to customers making a claim for certain consequential losses may take longer, the FCA added.
Money set aside by banks to compensate for mis-selling PPI has reached around 15 billion pounds so far, forcing lenders to beef up their capital positions.
Reporting by Huw Jones; Editing by Matt Scuffham and Mark Potter