(Adds details, background)
LONDON, July 11 Britain's banks are in the
process of paying out 1.2 billion pounds ($2 billion) to
compensate small businesses that were mis-sold complex interest
rate hedging products, data from the UK financial watchdog
showed on Friday.
The figure represents about a third of the 3.75 billion
pounds set aside by Britain's four biggest banks - Barclays
, HSBC, Lloyds Banking Group and Royal
Bank of Scotland - to deal with the issue.
The Financial Conduct Authority (FCA) in May ordered banks
to review almost 30,000 cases for possible mis-selling after
finding "serious failings" in the way the products - known as
swaps - were sold.
The swaps were sold on the basis that they would help to
protect smaller companies against the risk of rising interest
rates. However, when rates fell customers had to pay large
bills, typically running to tens of thousands of pounds.
Companies faced penalty charges if they wanted to get out of
the deals, conditions that many businesses said they were not
told about when purchasing the products.
About a third of customers in the review had their cases
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.
By the end of June 16,000 customers had been sent decisions
about redress, the FCA said on Friday. Of those, 13,500 were
offered compensation with a cash element. So far 8,000 customers
have accepted offers of compensation.
The regulator said last month that the nine banks involved
in the review had a met a 12-month deadline to look at all
cases, though some banks still had to communicate all decisions
($1 = 0.5877 British Pounds)
(Reporting by Clare Hutchison; Editing by David Goodman)