* 1.06 billion pounds so far paid out to customers
* Regulator says banks have finished reviewing cases
* RBS, Barclays yet to inform all customers of decision
* Proportion of firms offered alternative products rises
(Adds comment from lawyer, advisor, BBA)
By Matt Scuffham
LONDON, June 12 Britain's biggest banks have so
far paid out less than 30 percent of the 3.75 billion pounds
($6.3 billion) set aside to cover the mis-selling of complex
interest rate hedging products, according to data from the
The Financial Conduct Authority (FCA) ordered banks to
review 29,490 cases for possible mis-selling last May after
finding "serious failings" in the way the products were sold.
But when the banks did so, nearly a third of customers were
dismissed because they were deemed sophisticated enough to have
understood the products. More than half of those left under
review were then offered alternative hedging products rather
than full cash compensation.
"If you look at the sheer number that have been excluded
it's just absurd and if you look at the amount of alternative
products offered, it is ridiculous," said Abhishek Sachdev,
managing director of Vedanta Hedging, which advises businesses
on the products. He said only a small proportion of firms had
been satisfied with the outcome.
The original products were supposed to protect small
businesses against rising interest rates but left many facing
crippling payments when interest rates fell. Companies also
faced hefty penalties to get out of the arrangements which many
said they were not warned about.
The regulator said on Thursday that banks had met a 12-month
deadline for reviewing all the cases although Barclays
and Royal Bank of Scotland had yet to communicate all
decisions to customers.
The FCA said the banks - which also include Lloyds Banking
Group and HSBC - had sent out 13,740 decisions
to customers by the end of May. 6,730 customers had accepted
compensation and 1.06 billion pounds had been paid out.
The FCA's data showed that banks offered to pay full cash
compensation in 49 percent of decisions communicated by the end
of May, compared with 52 at the end of April and 57 percent at
the end of March.
Alternative hedging products have been offered in 44
percent of cases so far compared with 39 percent at the end of
April and 36 percent at the end of March.
Many businesses have said they didn't want the alternative
product offered any more than original one and had expected cash
"There's a big question mark as to whether it was ever fair
for alternative products to be substituted. I don't think
there's a natural argument that, because you were mis-sold A,
you would have had B anyway," said Alison Loveday, managing
partner at law firm Berg.
The British Bankers Association said all the decisions had
been verified by independent reviewers, which banks were told to
appoint by the regulator.
Barclays has set aside 1.5 billion pounds to compensate
customers, RBS 1.25 billion pounds, Lloyds 530 million pounds
and HSBC $598 million.
The FCA said money set aside by the banks also covered the
loss of the payments which customers would have made to them in
the future under the existing arrangements, the cost of
employing more than 3,000 staff to review the cases and the cost
of hiring independent assessors to review each case.
($1 = 0.5956 British Pound)
(Reporting by Matt Scuffham; Editing by Sophie Walker)