BRITAIN’S biggest banks have so far paid out only a fraction of the £3bn they have set aside to compensate small firms mis-sold interest-rate hedging products.
The mis-selling of these complex financial products is the latest scandal to engulf the banking sector.
Britain’s financial regulator said that £158.6m, just five per cent of the funds set aside, had been paid in compensation by Britain’s biggest four banks – Lloyds, Royal Bank of Scotland, Barclays and HSBC – by the end of December.
That compares with £81.2m at the end of November. The Financial Conduct Authority (FCA) had ordered banks to begin paying compensation last May after saying there were serious failings in the way banks sold interest-rate swaps.
The products were meant to insure small businesses against the risk of higher interest rates, but when rates fell, companies were left with bills typically running into tens of thousands of pounds.
The regulator has urged banks to speed up the compensation process, setting a deadline of May for the process to be completed.
The FCA said that banks had picked up the pace since November and were working towards meeting that target. The Federation of Small Businesses said an estimated 40,000 businesses were still awaiting compensation.
By the end of December, 18,700 small firms had been invited by banks to have their cases reviewed. A total of 1,040 offers of compensation had been accepted by customers at the end of last month, up from 547 at the end of November. The average payout per case settled stood at £152,500. In 872 of the cases, banks tore up the arrangement and paid cash compensation.
A Yorkshire Bank spokesman confirmed the bank has started paying out compensation to affected SMEs but declined to provide figures on the total paid to date.