The Independent
The Government’s aim of returning the entire Lloyds Banking Group to private ownership before the general election could be blown off-course by another mis-selling scandal.
An investigation by The Independent of the potential liabilities of British banks incurred from the mis-selling of interest rate protection products, known as swaps, has revealed that payouts could match the PPI scandal, which has so far cost them £22bn. Lloyds’ exposure has been estimated for The Independent to be a potential £5bn – and other UK banks could be similarly hit.
Until now estimates of the scale of the scandal have been limited to interest-rate hedging products (IRHPs) sold mostly to small and medium-sized businesses. But claims from so-called “sophisticated” clients – those with swaps valued above £10m or who employ 50 people or more – could push the total far higher.
The Independent, in conjunction with derivative analysts in the City who cannot be identified for legal reasons, examined high-value claims excluded from the Financial Conduct Authority’s recent review of mis-selling.
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.”
Read more
The Government’s aim of returning the entire Lloyds Banking Group to private ownership before the general election could be blown off-course by another mis-selling scandal.
An investigation by The Independent of the potential liabilities of British banks incurred from the mis-selling of interest rate protection products, known as swaps, has revealed that payouts could match the PPI scandal, which has so far cost them £22bn. Lloyds’ exposure has been estimated for The Independent to be a potential £5bn – and other UK banks could be similarly hit.
Until now estimates of the scale of the scandal have been limited to interest-rate hedging products (IRHPs) sold mostly to small and medium-sized businesses. But claims from so-called “sophisticated” clients – those with swaps valued above £10m or who employ 50 people or more – could push the total far higher.
The Independent, in conjunction with derivative analysts in the City who cannot be identified for legal reasons, examined high-value claims excluded from the Financial Conduct Authority’s recent review of mis-selling.
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.”
Read more
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