Fears Over 'Watered Down' Compensation for Interest-Rate Swap Victims as £10bn of Bank Pay-outs Hang in the Balance

LIVERPOOL, England, January 30, 2013 /PRNewswire/ --

Businesses affected by the mis-selling of interest rate swap agreements have voiced fears that they will not receive the level of compensation they are due under a Financial Services Authority (FSA) scheme.

The FSA is due to announce the pilot review of around 50 sample cases of mis-selling on Thursday 31 January. Industry figures estimate banks may be liable for up to £10bn in claims.

The FSA's review is expected to set out a basis for "fair and reasonable" redress for thousands of small and medium-sized businesses affected by the mis-selling scandal. It emerged last summer when the FSA revealed "serious failings" in the way these products had been marketed to SMEs.  Interest-rate swap products were typically positioned as simple options to protect against rising interest rates.  In fact, they were highly complex financial derivatives that had expensive downsides. 

Woodhead Investments, a Wakefield-based property group with 300+ residential homes and some 150 commercial properties across the north of England, is one of the many SMEs taking specialist advice on the hedging products it was sold.

David Woodhead, a director, commented: "We took on board a number of these policies in good faith but found them to be damaging and extremely expensive to exit. We had to sell a number of properties in our portfolio to be able to cut our ties with the bank in question. It would be marvellous to see the FSA properly hold all the banks to account for the stress and harm they have inflicted on family businesses like ours - but I'm not holding my breath."

Daniel Fallows, a specialist at Seneca Banking Consultants, which is handling claims worth in excess of £100m+ across the north west said: "There is an obvious concern that the FSA will come out with something that is watered down.  The banking industry has been lobbying to mitigate the impact of the FSA scheme, no doubt because the scale of the compensation could certainly affect bank balance sheets and share prices. We have seen good businesses left in ruins by the impact of these policies, which include caps, interest rate swaps and collars."

Eleven high street banks, including Barclays, Lloyds Banking Group, HSBC, the Royal Bank of Scotland, the Co-Operative Bank, Santander UK, and the Yorkshire and Clydesdale banks have agreed to compensate firms which were the victims of mis-selling. Several other smaller lenders have also joined a pilot FSA compensation scheme.

Mr Fallows added: "These policies were complicated and are difficult to unravel, so if a business feels it has been affected, it's important it takes specialist advice."

http://www.senecapartners.co.uk 

Notes to Editors

• Seneca Banking Consultants (SBC) is a specialist adviser to businesses that have been affected by mis-sold interest rate hedging products.

• SBC is one of a number of specialist financial businesses within the Seneca Group whose other areas of expertise include Corporate Finance, Asset Management, and Private Equity Investment. We have offices in Manchester, Birmingham and Leeds together with extended national networks.

• SBC are currently retained to provide advice and claims management services in relation to mis-sold interest rate hedging claims by a wide variety of businesses.

• The Seneca team includes highly experienced corporate financiers, chartered accountants, bankers, and lawyers who combine to provide our clients with a first class claims management solution in relation to their mis-sold interest rate hedging claim.

For press enquiries, please contact Chris Hulme at Paver Smith  on +44-(0)7971-350116 or Ruth Cobban on +44-(0)151-239-5000 /Cobban@paversmith.co.uk