Notorious for their work with mis sold PPI and forex rigging scandals, the UK’s banking industry now faces a hefty recompense of £4.4 billion to UK SMEs for mis selling complex interest rate hedging products.
The products were meant to protect smaller companies from rising business rates. However, when the rates fell, the companies paid extra charges and deal penalties, which were charged to them without their knowledge.
The UK Banks had paid out £1.8 billion pounds in compensation and its deadline is on March for claims. They covered the cost of having to terminate agreements early. They also employed more than 3,000 people to review the case.
Meanwhile, banks had dismissed more than a third of the claims. Cases left to be reviewed were offered alternative products rather than cash compensation.
The additional £4.4 billion recompense for the interest rates increases the total penalty, compensation and fines of UK banks to more than £40 billion. Around £28 billion would be PPI recompense, with RBS, HSBC and Barclays paying out an additional compensation amount.
According to the FCA, around £365 million were paid out to cover consequential losses. It also required banks to compensate beyond the direct losses suffered by businesses.