Banks Pay Out £1.2bn Over Mis-Selling Swaps

Britain's banks are paying out more than £1bn to small business that were mis-sold complex interest rate swaps, according to the City regulator.

The Financial Conduct Authority (FCA) said the first tranche of payments amounted to £1.2bn.

It said the figure is just under a third of the £3.75bn set aside by four high street giants.

Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland are involved in compensating businesses over the mis-sold hedging products.

In May, the FCA told the banks to examine around 30,000 cases for possible mis-selling.

The order came after it found "serious failings" in the way the products - commonly known as swaps - were sold to small and medium size (SME) businesses.

The swaps were sold on the basis that they would help to protect SMEs against the risk of rising interest rates.

But when rates fell the businesses were left with large debts, typically running to tens of thousands of pounds.

The SMEs also faced penalty charges if they wanted to break the contracts they were tied to.

Many of the businesses said they had not been told about the break clause penalties when signing the initial contract.

Around 30% of customers reviewed have not been compensated as they were deemed savvy enough to have understood the products' risks.

More than half of the remaining cases were then offered alternative hedging products rather than full cash compensation.

The FCA said by the end of June 16,000 customers had been sent decisions about redress.

Of that total, 13,500 were offered compensation from the banks with a cash component in the settlement offer.

The FCA said to date 8,000 customers have accepted the compensation terms.

Last month, the watchdog said nine banks involved in the review had a met a 12-month deadline to look at all cases.

Although it added that some banks still had not relayed the decisions to all customers.

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