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  1. Hello Forum, Does anyone have any experience to share here re Interest Rate Swap Agreement. A business friend who's been mis-sold a swap is going to a meeting with his Banks Lawyers in May. Is this advisable or should they only accept questions in writing? They are due a re-dress I guess based on what's occurred etc. Any thoughts welcome to pass on ...
  2. http://www.telegraph.co.uk/finance/rate-swap-scandal/9639202/Barclays-in-court-over-mis-selling-claims.html
  3. The Financial Services Authority (FSA) is in last minute talks with banks to agree a settlement package for small firms which believe they were wrongly sold interest rate swaps. According to sources, the plan is for an FSA announcement on Friday about the likely scale of alleged mis-selling and how the banks will provide restitution. The FSA is expected to be highly critical of the banks' conduct. Swaps were often sold to business as protection against interest rate rises. Independent assessor What the FSA wants to announce is a practical plan to provide restitution as quickly as possible, although that depends on persuading all the banks to join in. "The discussions are going right to the wire," said a banker. What the banks are desperate to avoid, in the words of a senior banker, is "writing a blank cheque, as we have done with PPI compensation". The FSA's plan would be to appoint an independent assessor, to whom businesses could submit their complaints. Small businesses would no longer have to incur the expense and inconvenience of suing their banks. The idea is that, for legitimate complaints, the assessor would unwind deals without the prohibitive costs normally imposed when a swap deal is cancelled. In some cases, there would be refunds of large interest bills stemming from the swaps and compensation. It is a complicated issue, because the banks argue that in most cases they followed the letter of rules on sales of such products to small businesses, even if the affected businesses now claim they had no idea of the potentially crippling liabilities they were taking on. As I understand it, the FSA has concluded that the banks frequently sold inappropriate swaps to small businesses, and that these financial deals are threatening the viability of some of these firms, because they forced them to pay a high interest rate at this time of economic stagnation. Complicated arrangements The swaps were usually sold to businesses in the years before the recession of 2008-9 as protection against a possible rise in interest rates. They took a number of different forms. Sometimes they were simple agreements to swap a variable interest rate for a fixed interest rate - though occasionally with bizarre conditions, such as that there would be a continued obligation to pay the new fixed rate even after the underlying debt had been repaid. Other arrangements were ceilings or caps on the interest rate that could be paid by the business, so-called collars - which included a ceiling and a floor - and asymmetric caps and collars, which actually forced businesses to pay a rising interest rate as the Bank of England reduced its official interest rate. Those businesses that bought the swaps frequently claim today that they did not understand what they were buying. And they did not notice that it would cost them a fortune to get out of the deals if they went wrong for them. They also say that banks when providing vital loans to them would then put them under pressure to also take on the swaps. Often these swaps would generate big fees and profits for the bank. What is interesting is whether the banks - with all the adverse publicity they have been facing (NatWest's breakdown of payment systems, Barclays ) - will feel they want a fight with the regulator over their sale of swaps to small businesses or whether they will decide to settle. More: http://www.bbc.co.uk/news/business-18631699
  4. Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland have agreed a settlement with the FSA to pay “appropriate redress” to small and medium sized businesses that were missold interest rate swaps. Following a two-month review of the sale of interest rate swaps by the banks, the FSA says it has found “serious failings” in the way the products were sold. Interest rate swaps are designed to protect consumers against increases in interest rates. Since 2001, banks have sold around 28,000 interest rate swaps. The products range in complexity from caps that fix an upper limit to the interest rate on a loan, to complex derivatives such as “structured collars” which fix interest rates within a band but introduce a degree of interest rate speculation. The FSA reviewed sales files, customer complaints and taped conversations, and also talked to over 100 customers. It found exit costs to cancel the product were poorly disclosed, banks failed to ascertain the customers’ understanding of risk, and non-advised sales straying into advice. The regulator also found evidence of over-hedging where the amounts or duration of the product did not match the underlying loan, and the sale of these practices being driven by rewards and incentives. The FSA says exact redress will vary for each customer, and not all businesses will be owed redress. Redress could include a mixture of cancelling or replacing existing products and partial or full refunds of the costs of the products. Banks’ redress programmes will be assessed by an independent reviewer at each bank appointed under the FSA’s powers. FSA conduct business unit managing director Martin Wheatley (pictured) says for many small businesses dealing with these products has been a difficult and distressing experience. He says: “I am pleased Barclays, HSBC, Lloyds and RBS have agreed to do the right thing by their customers and offer redress or a review of past sales. These firms have responded to the need to provide a fair deal for customers by working with us, and I welcome this outcome. “I am particularly pleased the chief executives Bob Diamond, Brian Robertson, Antonio Horta Osorio and Chris Sullivan have provided a personal assurance they will have responsibility for oversight of this work and will ensure complainants are treated fairly. “They have also committed that, except in exceptional circumstances, they will not foreclose on or vary existing lending facilities without the customer’s prior consent.” A statement from Lloyds says: “The group has assisted the FSA fully in relation to its review and has agreed to work with an independent third party to carry out a thorough assessment of sales of these products to certain customers. “Interest rate derivative products are not products the group has sold widely. Given the limited exposure of the group to these products the financial impact of this remediation and the associated costs are not expected to be material to the group.” Link: http://www.mortgagestrategy.co.uk/latest-news/banks-to-pay-redress-for-missold-interest-rate-swaps/1053810.article
  5. Labour investigates rate-swap sales The Labour Party has launched an investigation into the alleged mis-selling of interest rate hedging products by banks to small and medium-sized businesses. The City of London. A public evidence session will be held today to kick off the investigation, which will look at better protecting consumers and businesses from potential mis-selling. Photo: Rex Features By Harry Wilson, Banking correspondent 9:49PM BST 16 May 2012 5 Comments Ed Mayo, the former chief executive of the National Consumer Council, will lead the probe which is designed to support calls for an amendment to the Financial Services Bill to make it easier for small businesses to bring collective actions against lenders. A public evidence session will be held today to kick off the investigation, which will look at better protecting consumers and businesses from potential mis-selling. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9270703/Labour-investigates-rate-swap-sales.html
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