| LONDON, June 28
LONDON, June 28 Britain's Financial Services
Authority will announce on Friday it has found evidence banks
mis-sold interest rate swaps to protect companies against a rise
in borrowing costs, a source familiar with the situation said.
A finding by the FSA of mis-selling could lead to
compensation claims ranging from many millions to several
billion pounds from small companies who bought them.
It would be the latest in a string of mis-selling cases that
have plagued the financial services industry for over two
decades. Banks are already set to pay upwards of 9 billion
pounds ($13.96 billion)for mis-selling loan insurance.
The news will compound problems for a sector that reeled on
Thursday from news of a record $450 million fine on Barclays
for rigging interest rates.
That scandal is expected to spread to other lenders. Shares
in RBS and HSBC, which are also under
investigation, saw their shares also fall on Thursday.
The FSA, which declined to comment, has been probing the
sale of interest rate swaps, a derivative contract for small
businesses bought from HSBC, Lloyds, RBS
FSA Managing Director Martin Wheatley has said the main
banks have "questions to answer" on their sales of interest rate
With interest rates having been at historic lows for an
extended period of time, thousands of small companies may be
sitting on losses.
Michael Brennan at Bracewell Law, which is acting on behalf
of some of the small companies that sold the products, said
there are likely to be around 4,000 claimants with total claims
of 3-6 billion pounds though there are no hard figures so far.
"Over the life of their contract, these financial products
turned out to be for the sole benefit of the banks and in the
vast majority of cases were highly inappropriate for small
companies," Brennan said.
"Sold as protection against rising interest rates, they had
the effect of keeping struggling businesses on artificially high
rates, costing them thousands of pounds per month to service,"