RBS Interest rate swaps- cap/collar

[tomb2100]

Hi All

 

Been reading with interest as we have a delightful SWAP with Lloyds whom we've been with for nearly 40 years.

 

Our main issue was the fact that they agreed to half our borrowing margin (in writing!!) when we signed our 1st SWAP, then when things get tough for them our margin is now back to where it was originally, all loans are now capital and interest, whilst we have to pay thousands out per month for the SWAP!!

 

Anyway we are waiting to hear back from our solicitors following a meeting with counsel yesterday. Its probably no surprise to add that most of the SWAPS were generally badly explained, unsuitable, used words such as recommendations etc etc but apparently its not easy to do much about that as we all have to sign the Treasury Master Agreement which absolves them of most things! We are a small family owned property co. EDIT

 

Anyway will post again when we get feedback from counsel (also posted this on the Barclays Capital forum - can't find one for Lloyds!)

Edited August 21, 2011 by caro
Defamatory comment which could cause problems for the site.

[Clearancestan]

Hi,

 

I am very interested to hear from anyone that is in dispute with RBS about an interest swap cap/collar.

 

My business is really struggling as a result of this product.

 

Having interest rate management was a condition of a long term loan from RBS. We were told that this management product could be bought from the open market, but RBS have a Global Securities division that could sell the product.

 

We chose to go with RBS Global Securities under the understanding that the product is a "regulated product" so needs to be sold independently of the banking activity. At the time we had total borrowings of £4m so we took managament on £2.5m of borrowing. Only £1m related to the long term loan secured against a building.

 

Since the end of 2008 RBS have gradually withdrawn facilities to the extent that the only thing we have with RBS is the long term loan. Other borrowings with other banks.

 

We wanted to move the long term loan by selling one the properties and then moving to another bank and trying to get a facility secured by one of the remaining buildings.

 

RBS would not release charge over the business because of the liability on the interest rate management product.

 

It turns out that when interest rates went down RBS have been increasing the value of security they require to cover the hedge. As they are in first place on the carhes over the business they have been able to simply "ballon" their security requirement to the detriment of the business and other lenders.

 

If Global securities had sold "independently" of RBS they would have had to leave their security at the level identified at the time of purchasing the product.

 

Have spoken to RBS, I understand that by independent they mean that the interest hedge is independent of the bank loan and does not refer to the selling process.

 

Have been trying to find out what the FSA requires in the way of "independent selling" but no joy yet.

 

Anyone had any experience of this type of argument.

 

Look forward to your comments.

 

Stan.

[caro]

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[caro]

This thread may be of interest to some of you. http://www.consumeractiongroup.co.uk/forum/showthread.php?316796-Expert-believes-customer-s-signature-was-forged!!!&p=3531443

[karunathasan]

I have been sold interest rate swap by the RBS in August 2007 if any one was sold, and made any complain please let me know the out come. I did make complain but they did not agree with me I stop paying them they have taken me to court I am defending their claim and making a counter claim for losses. If any one in smiler situation please let me know.

[jmscs]

I had a thriving business. The bank took it away from me and I tried to stop them but failed. I have had to take them to court which is still on going. JC

[markrobinson]

Hi,

I have just registered after reading your comments, i have been missold one of these policies, I really did not understand it until fully explained, and now do not know how RBS could have sold such a complex product on such simplistic terms. Can you let me know how your case is going I am just at the beginning and am about to formally write and complain to RBS is this the best route.

Look forward to hearing from you.

[jmscs]

I did not go via FOS nor did I really complain. I tried to sort it out with them and had lots of meetings. It did not work out and they were not willing to listen to any proposals I put forward. I then met them with my lawyer and received the same treatment - no joy. All they seemed to want to do was take my properties and sell them which they have done. My experience sound similar, they sold me a product at the last minute and I had no idea what it was.JC

[Hussain707]

I was sold an interest rate swap. But what can I do?

They didn't explain it to me properly aswell.

[Tony Roche]

Hi Hussain, it seems that RBS has not settled with anyone on these deals. I have agreed with them that I do not have to make quarterly payments but just pay my normal repayment, although of course I am not benefitting from the reduced interest rates. I have lodged a formal complaint with them but as individuals I do not see that they will listen to any of these. I really lodged the complaint because they have to report them and I figure that the more people that complain the higher profile this issue will get. Hope this helps

[Cardinals]

There are some more people with issues about Swaps on the thread: Barclays Capital Rate Swaps (under the Barclays forum)

 

For info there have been a number of out of court settlements and some FOS upholds. As I understand it most are subject to non disclosure agreements.

[Cardinals]

The below does not relate directly to Swaps but it does sound like flocks of chickens coming home to roost!

 

FSA fines Credit Suisse UK £5.95m

 

 

 

The Financial Services Authority has fined Credit Suisse £5.95m for systems and controls failings in relation to sales by its private bank of structured capital at risk products.

SCARPs are complex financial products that provide income to customers but also expose them to the risk that they lose all or part of their initial capital. Between January 2007 and December 2009 Credit Suisse UK customers invested over £1 billion in SCARPs.

 

However, during that period there were a number of serious failings in the systems and controls in respect of those sales.

 

These included:

 

- Inadequate systems and controls in relation to assessing customers’ attitudes to risk;

 

- Failing to take reasonable care to properly evidence the suitability of SCARPs for customers; and

 

- Failing to monitor staff effectively to ensure that they took reasonable care when giving advice.

 

Concerns were identified by the FSA during a supervisory visit to the firm, which subsequently led to the FSA commencing its enforcement investigation. The FSA has found that Credit Suisse UK had poor systems and controls in place and failed to maintain adequate records regarding its advice on these products.

 

These failings amounted to a breach of Principle 3. As a result, customers were exposed to an unacceptable risk of being sold a SCARP that was unsuitable for them.

 

Since the discovery of these failings, Credit Suisse UK has made a significant number of changes to its advisory processes and has enhanced the systems and controls in place to ensure the suitability of its advice to its customers.

 

Credit Suisse UK has also agreed to carry out a past business review, overseen by an independent third party, in relation to SCARP purchases during the period identified.

 

If a customer is found to have been advised to purchase an unsuitable product, redress will be paid to the customer by Credit Suisse UK to ensure that they have not suffered financially as a result.

 

Credit Suisse UK agreed to settle at an early stage entitling it to a 30% discount on its fine.

 

Tracey McDermott, acting director of enforcement and financial crime, said:

 

“We have seen all too frequently the consequences of financial services firms failing to implement proper systems and controls to ensure their customers invest in suitable products. A proper assessment of customers’ individual needs and circumstances is even more critical where firms are selling complex products like SCARPs.

 

“Credit Suisse UK’s systems were not up to the level we, and their customers, are entitled to expect. Our recent ‘Dear CEO’ letter to the wealth management industry made it clear that significant and widespread failings exist in this area and standards need to improve. This penalty should leave firms in no doubt about our determination to make that happen.”

[Orwell Crossing]

Hi,

 

I am very interested to hear from anyone that is in dispute with RBS about an interest swap cap/collar.

 

My business is really struggling as a result of this product.

 

Having interest rate management was a condition of a long term loan from RBS. We were told that this management product could be bought from the open market, but RBS have a Global Securities division that could sell the product.

 

We chose to go with RBS Global Securities under the understanding that the product is a "regulated product" so needs to be sold independently of the banking activity. At the time we had total borrowings of £4m so we took managament on £2.5m of borrowing. Only £1m related to the long term loan secured against a building.

 

Since the end of 2008 RBS have gradually withdrawn facilities to the extent that the only thing we have with RBS is the long term loan. Other borrowings with other banks.

 

We wanted to move the long term loan by selling one the properties and then moving to another bank and trying to get a facility secured by one of the remaining buildings.

 

RBS would not release charge over the business because of the liability on the interest rate management product.

 

It turns out that when interest rates went down RBS have been increasing the value of security they require to cover the hedge. As they are in first place on the carhes over the business they have been able to simply "ballon" their security requirement to the detriment of the business and other lenders.

 

If Global securities had sold "independently" of RBS they would have had to leave their security at the level identified at the time of purchasing the product.

 

Have spoken to RBS, I understand that by independent they mean that the interest hedge is independent of the bank loan and does not refer to the selling process.

 

Have been trying to find out what the FSA requires in the way of "independent selling" but no joy yet.

 

Anyone had any experience of this type of argument.

 

Look forward to your comments.

 

Stan.

We also were persuaded to buy this product. We spent 5 months arranging a 20 year loan with Natwest/RBS and sold a cap and collar to cover the first three years interest only part of the loan. I held off signing up to the cap and collar for just over 2 months but was finally persuaded to sign as I was told the bank had already secured the £1.3m and by not signing was putting them at risk if the rate went up, the interbank rate was falling in December 2007 and I felt would fall a little bit more but signed a 36month term. Two and a half years later we had a change of manager and then passed to Global Restructuring who informed us that the loan was changed at the last minute to a three year only loan and as I had signed it that was tough. When questioned I was told that the manager at the time thinks he remembers me saying I changed my mind.

 

There is no paperwork to support this claim before or after signing date.

And so I ended up with a cap and collar which lasted 2 months longer than the loan as well as being hit with another setting up fee.

Karl

[jmscs]

I was forced into a swap deal at the last minute as well. The bank said that if I did not sign the papers they would take the properties off me as they had already sent the loan money to my solicitor. I had no choice.

Karl - I should have asked on what date you signed the deal as the regulations are different depending on when you signed.

[Orwell Crossing]

December 2007Karl

[Orwell Crossing]

I was forced into a swap deal at the last minute as well. The bank said that if I did not sign the papers they would take the properties off me as they had already sent the loan money to my solicitor. I had no choice.

Karl - I should have asked on what date you signed the deal as the regulations are different depending on when you signed.

 

The 5th of October 2007 for the main loan and the c/collar December 2007Karl

[jmscs]

The 5th of October 2007 for the main loan and the c/collar December 2007Karl

 

I would guess that the swap was sold to you just after the MPC meeting in early December, when it was obvious to the banks what was happening to interest rates.You need to look at the information provided to you by the bank and any assessment they made of your financial position prior to the deal. You should also check what financial info they presented to you about the product itself. My solicitor likened my deal to a horse race where the bank and all the jockey's knew who was going to win, the probability was therefore weighted heavily in their favour. The only thing they could not foresee was their jockey falling off or some other unknown event which would derail their plan. The resuly - a very very small chance you would win and a huge chance that the bank would win.

[Orwell Crossing]

I would guess that the swap was sold to you just after the MPC meeting in early December, when it was obvious to the banks what was happening to interest rates.You need to look at the information provided to you by the bank and any assessment they made of your financial position prior to the deal. You should also check what financial info they presented to you about the product itself. My solicitor likened my deal to a horse race where the bank and all the jockey's knew who was going to win, the probability was therefore weighted heavily in their favour. The only thing they could not foresee was their jockey falling off or some other unknown event which would derail their plan. The resuly - a very very small chance you would win and a huge chance that the bank would win.

 

Hi I have been told that the rate swap to protect me from the interest rate going up (no mention of what the consequence might be if it fell all the way to .5%).If rate swap is a genuine protection for costumers, how many are being sold after the fall to .5%?Karl

[Guest Ellwood]

Hi All,

 

We have just found this forum and are in same problem and we are about to start complaint to FOS. We have thought for some time that a class action may be the way forward and after a bit of searching have found the following recent reports - can't post the links so I've just given the titles to search for. It seems there is a solicitor in Wales (SRB Legal) looking to be contacted by other affected business from across the country. We are going to continue proceedings with the FOS but also going to contact and submit our case to him and would urge everyone else to do so if we really want to see something happening.

 

Although I wouldn't wish this on anyone, if nothing else its nice to we are not on own on this and that this particular wrong doing is finally getting the media coverage it deserves. If anyone wants to make contact then please do so.. natwestclassaction at gmail dot com

 

Sky - Banks 'Mis-Sold' Interest Rate Protection

Wales Online - Property tycoon 'heartbroken' by empires collapse

BBC - Do UK Banks face another mis-selling scandal?

SRB Legal

 

Ellwood.

Edited January 6, 2012 by Ellwood

[Orwell Crossing]

This was some of the examples of how good it was for me to take on the rate swap Nothing about a down side

 

Sent: 23 November 2007 08:32

Subject: Current interest rate protection

Morning ****

 

Hope you are well. Ahead of your meeting with C**** we thought it a good idea to give you a feel for the protection levels currently available.

 

With respect to the interest rate collar we discussed we can currently offer a zero cost 3 year collar with a Cap of 6.00% and floor of 5.25%.

 

The majority of economists are now predicting base rate falls to 5.25% by the end of 2008, and this structure allows you to participate from those falls if they happen whilst still remaining protected at 6.00% in case base rate does rise.

 

Whilst there is a strong likelihood of a base rate cut it is worth remembering that this is only a perception and not a certainty, and these perceptions change very quickly. If we see increasing core inflation over the next couple of months the window for a rate cut will start to close, and with oil and grain prices currently rampant I certainly wouldn't bet against rising inflation over the next few months.

 

Hope that gives you some food for thought.

 

Kind regards

 

RBS

 

 

No pressure then

 

Karl

Edited January 9, 2012 by Orwell Crossing
add date

[MDO]

Hi,

 

We borrowed a sum of money to build a large extension to our hotel. On the week we were were due to complete our Bank Manager suggested that we take out a cap and collar. He said that this would offer us security, he also said that the bank would probably not complete the loan without this. This was obviously an afterthought as it had never been mentioned when we were first offered the loan. They just felt they had us over a barrell as the work was due to start the next week.

 

The interest rates then plummeted and we now pay an additional £7,000 a quarter to the bank in interest. At no stage was this level of repayment mentioned to us. The initial £55,000 set up cost was all we thought we had to pay.

 

I asked my Bank Manager how we could get out of it and we were told that it would cost us £100,000 odd to finish it.

 

We are now trying to find out how we can get out of it. Unfortunately I have nothing in writing all we had was verbal agreements.

[Aggi]

Would be very interested to hear from of other small to medium companies in process of commencing action/formal complaint against RBS based on the miss selling of interest rate swap/cap collar derivatives . We are aware the wheels are in motion by increasing numbers

 

The basis of our claim is extensive and varied and includes the misselling relating to the paperwork deployment and actual content thereof, breach of duty of care, breach's of COB and MIFID

 

We beleive the RBS is benefitting from fact the missold customers such as our selves are fragemnted are unable to pool our efforts and basis of claim

 

Look forward to receiving responses

 

 

I won a case against RBS with an order from the FSA ombudsman, in April 2010, however they have only just settled the matter last week!!!. The product cost over £800000 at final reckoning.

The products were sold to beef up lending margins, where they offered headline rates on commercials around 1.225% over base.

One of the key things here is how much information did you have to make the purchase and what status were you, they slipped out of the regulatory net by dealing with "Market Counter parties", although the EU's definition of this and RBS's is a little different, A market counterparty is a large company, a very wealthy individual or the treasury department of a company or perhaps another bank- your were not any of these i a guessing!!!!

 

There is hope and if you want some help then I will happily give it!, it will take some time though.

 

Aggi

[James Ducker]

Hi Aggi, I would love to have a chat if possible? As you may well be aware, I was the first "whistleblower" to leave the banks and admit there is an issue. 2 years of fighting to bring this to light - we may be getting somewhere. I was with the FOS last week and I must say was underwhelmed. Be great to hear your story to help with my clients and my understanding of the FOS system / protocols etc.

[Aggi]

I would be very happy to help- from what I hear I am one of the very few, or perhaps the only one to have succeeded, against RBS on a rate instrument. I tried to put my e mail address here, but I have to make another 8 posts, but happy to communicate in open forum.

Aggi

[citizenB]

I would be very happy to help- from what I hear I am one of the very few, or perhaps the only one to have succeeded, against RBS on a rate instrument. I tried to put my e mail address here, but I have to make another 8 posts, but happy to communicate in open forum.

Aggi

 

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