Banks have paid out a total of £500,000 so far to customers missold interest rate swaps, according to new Financial Conduct Authority figures.
The regulator first raised concerns about the ways banks sold interest rate swaps in June 2012. The FCA carried out a review of 173 sales of interest rate swaps and found that over 90 per cent did not comply with regulatory rules.
Banks agreed to review the sale of interest rate swaps, which are designed to protect consumers against increases in interest rates. Over 30,000 sales are in the process of being reviewed, covering sales dating back to 2001.
The banks involved in the review are Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander, Clydesdale and Yorkshire Banks, Co-op Bank, Allied Irish Bank and Bank of Ireland.
In January the FCA set out the approach banks should take when reviewing interest rate swap sales.
Banks have to assess whether customers were “sophisticated” enough to understand what was being sold to them, with non-sophisticated customers asked to opt in to the review. Customers who took out the most complicated products will automatically secure redress, while others will have their cases reviewed.
An independent reviewer has to check the banks’ work in each case.
The FCA says as at the end of August 10 offers of redress have been accepted, with payouts totalling £500,000. It expects this figure to increase as 210 redress offers have been made to customers and a further 1,700 are due to go out shortly.
FCA chief executive Martin Wheatley says: “With 85 per cent of cases now under review, banks have made progress. But like the thousands of affected small businesses, we want to see redress paid quickly to those who have suffered loss as the result of misselling.”
British Bankers’ Association chief executive Anthony Browne says: “Banks are working hard with the regulator to ensure the review process, which began four months ago, is completed as quickly as possible.
“The industry has suspended payments for businesses in financial distress pending completion of the review. If any other business is facing financial distress and wants a suspension of payments they should get in touch with their bank immediately.”
The FCA will provide monthly updates on the level of interest rate swap payouts made by the banks.