* Banks pay out 158 mln, 5 pct of 3 billion set aside
* Regulator wants compensation to be paid by May
* 1,040 offers accepted by customers
* Average payout per case is 152,500 stg
* FSB says 40,000 businesses awaiting compensation
By Matt Scuffham
LONDON, Jan 10 Britain's biggest banks have so
far paid out only a fraction of the 3 billion pounds ($4.9
billion) they have set aside to compensate small firms mis-sold
interest-rate hedging products, prompting suggestions businesses
may be getting a raw deal.
The mis-selling of these sophisticated financial products is
among numerous scandals facing the banking sector in recent
years and the payouts come on top of more than 17 billion pounds
set aside by British banks to compensate customers mis-sold loan
Britain's financial regulator said on Friday 158.6 million
pounds, just 5 percent of the funds set aside, had been paid in
compensation by Britain's biggest four banks - Lloyds,
Royal Bank of Scotland, Barclays and HSBC
- by the end of December.
That compares with 81.2 million at the end of November.
The Financial Conduct Authority (FCA) had ordered banks to
begin paying compensation last May after saying there were
serious failings in the way banks sold interest-rate swaps.
The products were meant to insure small businesses against
the risk of higher interest rates, but when rates fell,
companies were left with bills typically running into tens of
thousands of pounds or facing big penalties to get out of the
The regulator has urged banks to get on with compensating
customers, setting a deadline of May for the process to be
completed, and said on Friday that banks had upped the pace
since November and were working towards meeting that target.
However, swaps experts raised concerns over the proportion
of cases where banks didn't need to pay compensation.
Daniel Hall, managing director of AllSquare, which advises
companies pursuing claims, said the data showed 96 percent of
swaps had been mis-sold, but only about 60 percent of completed
cases had resulted in compensation.
"As these assessments and determinations are largely
subjective, it raises questions about whether businesses are
getting a fair rub of the green," Hall said.
The Federation of Small Businesses (FSB) said an estimated
40,000 businesses were still awaiting compensation.
"The banks must not get complacent and making swift progress
in paying the remaining redress is the only way to rebuild
trust," said FSB National Chairman John Allan.
By the end of December, 18,700 small firms had been invited
by banks to have their cases reviewed. A total of 1,040 offers
of compensation had been accepted by customers at the end of
last month, up from 547 at the end of November. The average
payout per case settled stood at 152,500 pounds.
In 872 of the cases, banks tore up the arrangement and paid
cash compensation. In the remaining 168 cases, businesses have
been offered alternative products. The average payout per offer
of compensation stands at 152,500 pounds. In 672 cases, the
banks were not required to compensate customers or offer an
"Banks have picked up the pace since November; we asked that
they focus their efforts on making far more rapid progress in
assessing individual cases and crucially in providing redress,"
said FCA director of supervision, Clive Adamson.
Businesses have a six year time limit in which to lodge a
complaint under Britain's statute of limitations, and, as most
of the products were sold prior to the 2008 financial crisis,
time is running out to make a claim.
"If they go past their six-year period then it is bad news
for them. Day-by-day more and more businesses are out of
limitation," said Abhishek Sachdev, managing director of Vedanta
Hedging, which advises firms on interest rate swaps.
The FCA data showed differing rates of progress in dealing
with cases between the banks. RBS has told customers the outcome
of the review in 1,505 cases, compared with 1,265 at HSBC, 727
at Lloyds and 683 at Barclays.
RBS has more claims under review than its big three rivals
combined. It is assessing 9,194 cases, compared with 3,300 at
Barclays, 3,253 at HSBC and 1,771 at Lloyds.
RBS has set aside 750 million pounds for compensation - half
of the 1.5 billion at Barclays, which is the biggest provision
of all the banks. HSBC has allotted 460 million pounds and
Lloyds 400 million.
FCA Chief Executive Martin Wheatley said in November that
the full bill will not be known for some time. He said the bulk
of the money set aside so far is to pay back money actually paid
for the products and banks have yet to set aside large amounts
for so-called consequential losses.