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Interest Rate Hedging Product Scandal to Hit UK

Another new mis-selling scandal for the banks, especially the Lloyds Banking Group to deal with could be hitting very soon. This scandal centres on interest rate protection products which are more commonly known as swaps.

It’s said that this scandal could be a “bigger problem” for the banks than the payment protection insurance (PPI) scandal which has so far seen them pay out billions of pounds.

Lloyds Bank

The Independent conducted this investigation into yet another mis-selling scandal and it could easily derail the Government’s plans to return the entire Lloyds Banking Group to private ownership before the general election.

The investigation into the potential liabilities of the British banks incurred from the mis-selling of interest rate protection products which, as we mentioned earlier are more commonly known as swaps, has found that the pay-outs could match, if not be more than that of the PPI scandal which hit the country around 2008 and has so far cost around £22billion.

The investigation also found that Lloyds’ exposure in this scandal could cost them an estimated £5bn and it could also hit other UK banks in a similar way.

Lloyds aren’t the only bank that could be hit hard by this. There’s a number of other banks like HSBC, Natwest, and the Royal Bank of Scotland to name but a few. It would seem that there’s no one in the banking word that is safe from these scandals these days.

Interest-Rate Hedging Products

Until now, the scale of the scandal has been limited to interest rate hedging products (IRHPs) which have been sold mainly to both small and medium-sized businesses.

There are clients which are considered to be more “sophisticated” than others, i.e. those with swaps valued above £10m or those companies who employ 50 or more staff. These are the companies who could possibly push the cost to the banks up from £5bn to quite a lot more.

City Analysts

The Independent, along with a number of analysts in the City who can’t be named or identified for legal reasons, examined a number of high value claims which were excluded from the Financial Conduct Authority’s recent review of mis-selling.

Speaking on the findings, one analyst said: “This is potentially a bigger problem for UK banks than PPI. Profits from PPI sales somewhat offset the £22bn the banks were forced to pay out in compensation. But profits on swap derivatives could be dwarfed by high settlement costs.”

To Conclude…

None of this looks very good for the banks or the Government with the election fast approaching and with yet more money set to be paid out due to another mis-selling scandal this could really dent the current Government’s trust in the banks and also, the general public’s trust in the Government.

One other huge mis-selling scandal that is still going strong and has at least another £15 billion still to be claimed, is PPI. You could be owed money from the likes of Lloyds for their mis-selling of PPI so why not get in touch today and we’ll find out what you could be owed.

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Interest Rate Hedging Scandal

About the author

Daniel Lee

Company Director

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