* FCA says banks on track to hit May compensation deadline
* Banks so far have paid out 482 mln stg in compensation
* Offer 'fair alternative' to consequential loss claims -FCA
* Consequential losses bill could be 6 bln stg -claims firm
By Matt Scuffham
LONDON, March 5 Britain's financial regulator
urged small firms that were mis-sold interest rate hedging
products by banks to join its compensation scheme as it revealed
only 482 million pounds has been paid out of nearly 4 billion
pounds set aside by banks.
The interest rate hedging products were designed to protect
smaller companies against rising interest rates but when rates
fell, companies faced costs typically running to tens of
thousands of pounds. They also faced penalties to get out of the
deals, which many said they had not been told about.
The Financial Conduct Authority (FCA) ordered banks to begin
paying compensation last May after saying there were serious
failings in the way the products were sold.
By the end of February, the FCA said on Wednesday that
Britain's biggest four banks - Royal Bank of Scotland,
Barclays, Lloyds Banking Group and HSBC
- had paid out 482 million pounds ($803.64 million) in
compensation, up from 306 million pounds a month earlier.
Some firms have opted to stay out of the scheme and take
legal action against banks, including claims for consequential
Claims for consequential losses set the clock back to the
point before the products were sold and require banks to
compensate not just the direct cost of the mis-sold contracts
but any losses that businesses have suffered as a result of
leaving the agreements.
The regulator urged firms not already in the compensation
scheme to join it, saying it delivers "fair and reasonable
redress to customers where appropriate without the necessity to
hire lawyers or claims management companies".
The FCA said an offer by banks to pay customers 8 percent
annual interest on top of compensation payments represented a
"straightforward and fair alternative" to putting together
consequential loss claims which would take longer to assess.
But Daniel Hall, managing director of All Square, which
advises companies pursuing claims, said firms needed to find out
how they can claim for consequential loss.
"What these figures do not really reveal is what is fast
becoming the single biggest concern for the banks involved - the
issue of consequential loss. We estimate that the final bill for
consequential losses could be as high as 6 billion pounds," Hall
So far 18,800 firms had agreed with banks to have their
cases reviewed and 3,430 had accepted compensation or
alternative products, up from 2,092 at the end of January.
The average payout per offer of compensation stood at
140,000 pounds at the end of February, down from 146,000 pounds
at the end of January.
Barclays has set aside 1.5 billion pounds to compensate
customers, RBS 1.25 billion pounds, Lloyds 530 million pounds
and HSBC $598 million.