Sat, Jun 30, 2012 - Page 15 News List

Four UK banks to provide redress for mis-sold products

AP, LONDON

The UK’s biggest banks have agreed to a settlement for mis-selling interest-rate protection products to small and medium-sized businesses, the country’s financial regulator said yesterday.

The Financial Services Authority (FSA) said Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland (RBS) have all agreed to provide redress to victims of mis-selling.

The news is the latest setback to befall the sector following the revelations this week that Barclays was slapped with fines worth £290 million (US$450) million for rigging the London interbank offered rate, but providing false data on its cost of borrowing from other banks between 2005 and 2009.

The FSA said that about 28,000 interest rate protection products had been sold to businesses since 2001. It gave no estimate of how many customers would be entitled to redress, or how much it would cost the banks.

The FSA said the products ranged from simple caps that set a limit on the interest rate, to more complex derivative products.

During a two-month review, the regulator said it found cases of poor disclosure of exit costs, failure to be sure that customers understood risk, and over-hedging in which the protection or duration did not match the underlying loan.

Rewards and incentives for bank employees also contributed to mis-selling, the FSA said.

Redress could include canceling or replacing the products, or full or partial refunds, it added.

The banks have also agreed to stop selling “structured collars” which fix interest rates within a band but introduced a degree of interest rate speculation, the financial authority said.

The sector’s reputation for good practice has already taken a battering this week after the Barclays fines.

RBS and HSBC are also being investigated for suspected fiddling of rates, British Chancellor of the Exchequer George Osborne said.

This story has been viewed 1792 times.
TOP top