Banks pledge to speed up swap redress scheme

BRITAIN’S largest banks have responded to criticism from the City regulator by agreeing to speed up the process of compensating small businesses that were mis-sold complex financial products.

Lenders including HSBC and Royal Bank of Scotland have adopted a two-stage approach to redressing interest rate swap customers after the Financial Conduct Authority (FCA) accused the industry of dragging its heels.

The watchdog said earlier this month that only 32 offers of compensation have been agreed, worth a total of £2 million, out of almost 30,000 cases being reviewed.

Rate swaps were marketed as protection against rising borrowing costs, but the financial crisis caused rates to slide and many firms faced penalties to get out of the deals.

Under initial redress plans, firms that suffered extra losses after taking out a swap, for example redundancy costs or lost contracts, would have received nothing until these “consequential losses” had been assessed. However, HSBC and RBS have now agreed to pay out for the original mis-sold contract before examining the consequential losses.

Lloyds is taking a case-by-case approach, focusing first on those in “financial distress”, as it believes they “will benefit most from getting an early payment of any redress”. Barclays also said it will consider payments to financially-distressed customers on a case-by-case basis while loss claims are processed.

Banks have set aside £3 billion in swap compensation and FCA chief Martin Wheatley said yesterday’s moves were a “good first step”.