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koala_bear

I R Business Loan Swap Monster Grows

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Indy Article:

http://www.independe...ms-8804142.html

Interest rate swap scandal: Banks face hidden bill of up to £10bn to settle property developer claims

Britain's banks face a hidden bill of up to £10bn to settle claims from property firms put at risk by the interest rate swap scandal, according to new research.

Many of the country's best-known banks, including Royal Bank of Scotland, Barclays and HSBC, have been hit with more than 30,000 cases from small businesses over the sale of controversial financial packages.

Among those, thousands of property developers could receive compensation and better lending terms worth between £5bn and £10bn if they drop the cases, according to property services specialist DTZ.

In the most detailed analysis of the scandal so far, DTZ estimated that as many as one in five commercial borrowers could have a valid claim over mis-selling.

Lenders have already put aside provisions of nearly £3bn to cover the mis-selling cases.

Those making claims against the banks range from some of Britain's smallest companies to multi-millionaire businessmen such as Lord Sugar.

Data provided to DTZ of nearly 70 out-of-court settlements worth £104m showed that on average claimants received a package worth £1.5m each.

Hans Vrensen, global head of research at DTZ, said: "What these figures brought out is the quite significant mismatch between the loans taken out by borrowers and the swaps sold to them."

The Financial Conduct Authority (FCA) last week revealed that only ten of more than 30,000 small business victims have so far officially received redress from banks.

The average payout in those cases was around £50,000 each, according to the regulator's figures. Royal Bank of Scotland is potentially the most exposed bank, with more cases than Barclays, Lloyds Banking Group and HSBC combined.

The regulator's compensation scheme has controversially excluded thousands of claims on the basis that certain businesses were sophisticated enough to know the risks.

So double to triple the bill, how unexpected :lol:.

Shame that this will be a bail out of (former?) property developers rampers

The DTZ work seems to include consequential losses where as the FCA estimates are direct compensation only, the indirect consequential damages to be sorted later.

DTZ report download link for those wanting to chew on more:

(free registration required)

http://www.dtz.com/G...et+September+13

Edited by koala_bear

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Got to love how these estimates keep going up.

Can't wait for the lawsuits involving mortgages.

FCA [ex-FSA] has said IO mortgages weren't mis-sold (too big to bail category ;))

However the FCA has just launched and inquiry into savings in the UK especially teaser rates.

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"Banks idiot tax payers face hidden bill of up to £10bn to settle property developer claims "

Corrected for accuracy.

On the FCA basis cases (i.e. excluding most sophisticated clients) 13,000+ of 30,000+ cases were RBS alone and Lloyd (HBoS) getting a high placing too so it is the tax payers on the hook.

What we don't have a good view on is the non-FCA mediated cases (i.e. sophisticated clients) where thing could get bigger than the FCA mediated.

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Banks’ worst fears receding due to ‘six year rule’

Borrowers which have a claim against their bank over a potential mis-sold interest rate swap have to do so within six years of the contract’s life, under the UK’s statute of limitations.

This effectively means that the number of potential claims made against banks – just over six years on from the peak of the UK commercial property market – is fast reducing, and further shrinking daily.

Banks are increasingly in confidence that the number of “time-bared” claims will restrict the entire scale of potential cases of mis-selling against them.

For the government, the timing of another potential bank mis-selling scandal could not be worse, given its motivation to sell shares of Lloyds Banking Group, and thereafter The Royal Bank of Scotland, back into the private sector.

http://ht.ly/oHyrq

This explains why the banks have dragged their feet on this - lets steal your money, make it so complicated that, although you know it's happened, you just don't understand how? By the time you figure it out the Statute of Limitations kicks in. :angry:

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http://ht.ly/oHyrq

This explains why the banks have dragged their feet on this - lets steal your money, make it so complicated that, although you know it's happened, you just don't understand how? By the time you figure it out the Statute of Limitations kicks in. :angry:

6 years of contract life...

As many of the loans and/or swap contracts are still in contract (i.e. loans being repaid etc), 6 years afterwards (from now) could take things to 2020 or beyond. So only very very old claims effectively barred (i.e. where loan or swap finished pre 2007)?

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6 years of contract life...

As many of the loans and/or swap contracts are still in contract (i.e. loans being repaid etc), 6 years afterwards (from now) could take things to 2020 or beyond. So only very very old claims effectively barred (i.e. where loan or swap finished pre 2007)?

I had already wondered about that - found it odd

http://senecabanking.co.uk/faqs/

For breach of contract the limitation period is 6 years from the date you entered into the Interest Rate Hedging Product, this means that you have 6 years from the start of your Interest Rate Hedging Product to pursue a claim for breach of contract.

So statute starts from 6 years of purchase, not from 6 years of knowledge of miss-selling? - I'm going to check this out as this is from a claims company and may be complete ganglies.

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"Banks idiot tax payers face hidden bill of up to £10bn to settle property developer claims provide Osborne with another stealth, fiscal stimulus."

And again.

.

Edited by zugzwang

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On the FCA basis cases (i.e. excluding most sophisticated clients) 13,000+ of 30,000+ cases were RBS alone and Lloyd (HBoS) getting a high placing too so it is the tax payers on the hook.

What we don't have a good view on is the non-FCA mediated cases (i.e. sophisticated clients) where thing could get bigger than the FCA mediated.

Sophisticated clients should not get anything. It is a case of caveat emptor. These clients get classified as such and lose most protection given to the small clients.

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6 years of contract life...

As many of the loans and/or swap contracts are still in contract (i.e. loans being repaid etc), 6 years afterwards (from now) could take things to 2020 or beyond. So only very very old claims effectively barred (i.e. where loan or swap finished pre 2007)?

Seems the banks are right to be worried about the litigation limitation being receded.

The standard limitation period for contractual or tortious claims is of course six years from the date on which the cause of action accrued. The FSA refer to 40,000 sales being reviewed dating back to 2001. If this timescale is used for the full review, any contracts entered into pre-2007 are already time-barred from contract claims, which raises interesting questions as to how limitation points are treated. Limitation in respect of tortious claims gives scope for arguments about when loss was suffered.
]

Maybe the total figure will be more than trebled?

The FSA's widely reported initial review into mis-selling of swaps and similar hedging products took place in 2012 and, following Haward, it is arguably from this point a customer should have been aware of the latent damage they suffered. This might well give claimants until 2015 to bring claims but the area is a grey one.

http://www.stewartslaw.com/clive-zietman-and-tom-otter-write-article-on-the-mis-selling-of-interest-rate-swaps.aspx

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Another financial product found to have been miss sold - no mention yet of the number's involved. Did the banks do anything that wasn't illegal or immoral?

:o

The ongoing review by the ­Financial Conduct Authority of mis-sold interest rate hedging products does not cover the 'fixed rate tailored business loans (TBLs)' sold in large numbers by Clydesdale Bank and described by experts - and in one letter by the bank itself - as ­containing an embedded swap or derivative.

However, the Clydesdale's fixed rate TBL is classified as a commercial loan outside FCA regulation, enabling the bank to exclude it from the FCA-led review.

FCA chief executive Martin Wheatley recently told LibDem MP John Thurso at a Treasury Committee hearing, that the fixed rate TBLs were "not significantly different from swaps", and that there was a "potential gap in the regulatory structure".

Mr McGrory's complaint was rejected by the ombudsman last year, but he lodged an appeal.

Rory Stoves at the Financial Ombudsman Service said there had now been an adjudication in favour of Mr McGrory.

The ombudsman, the only avenue of redress for thousands of ­Clydesdale TBL borrowers, has now provisionally upheld the mis-selling complaint of St Andrews hotelier Jim McGrory, which was highlighted by The Herald last November.

http://www.heraldsco...ruling.22214899

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Seems the banks are right to be worried about the litigation limitation being receded.

]

Maybe the total figure will be more than trebled?

http://www.stewartsl...rate-swaps.aspx

The most pessimistic view for the banks would be 6 years from the point the loss could be properly quantified. If IRs change (go up) before a still live swap ends the damage still can't be fully quantified...

One thing I'm not sure on in this whole sage is who the ultimate counter party for the swaps were, the lenders or were they actually with other (fixed income) investors like pension funds?

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The most pessimistic view for the banks would be 6 years from the point the loss could be properly quantified. If IRs change (go up) before a still live swap ends the damage still can't be fully quantified...

One thing I'm not sure on in this whole sage is who the ultimate counter party for the swaps were, the lenders or were they actually with other (fixed income) investors like pension funds?

Wish I knew the answer to this - currently, it appears that the banks are accepting 'blame'. This will likely change if they can find a way out of it. Probably turn out to be a complex interplay of all scenarios possible - any thing to further confuse the punter's...

Originally I had thought that any business now bankrupt or closed down would have been the hardest to determine loss for, but you are correct. How on earth can you quantify loss on a live swap?

I know from Bully Banks that at least one advisor was not regulated by FSA or FCA - so he or she couldn't have been advising on the banks part - or could he/she? :o

.

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Panorama 8.30 Monday BBC1

Might be worth watching...

Panorama lifts the lid on what could be Britain's biggest financial mis-selling scandal - the hard sell of so-called interest rate swaps. With thousands of businesses pushed into administration or struggling to stay afloat, Panorama hears from bank insiders as well as from business owners and employees who have lost their jobs and homes.

As the new financial regulator faces its first major test, reporter Adam Shaw asks why the banks who broke the rules are allowed to control the redress scheme for the victims. Has anything really changed in the way our banks are regulated?

http://www.bbc.co.uk/programmes/b03dz52t''>http://www.bbc.co.uk/programmes/b03dz52t' rel="external nofollow">

http://www.bbc.co.uk/programmes/b03dz52t

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Sophisticated clients should not get anything. It is a case of caveat emptor. These clients get classified as such and lose most protection given to the small clients.

I'm not sure many deserve much redress, or special treatment, at all, they seem to be buoyed by PPI, which was consumers. Businesses of any size traditionally enjoy much less if any consumer rights style protection. For example with online shopping no businesses, of any size, can take advantage of distance selling regulations.

Of course this could just be another PPI style helicopter drop on the over-indebted, in this case SME's up to their neck in commercial property debt and property developers, masquerading as a mis-selling scandal.

And when's mis-selling just buyer remorse. Can I still make a mis-selling claim because I bought a Betamax video recorder from Dixons after the salesman did the hard sell? My guess is if interest rates had gone up you wouldn't have heard a peep out of this lot.

Edited by SNACR

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Was reading legal papers by Wragges, Herbert Smith, Taylor Wessing yesterday, all published this month. Important outcome of an appeal.

No doubt bad news for those who think banks should be responsible for every debtor's debts (the victims), including those addicted to buying house after house, mortgaging their own homes to do so.

The mere existence of the Conduct of Business Rules does not give rise to a co-extensive duty of care at common law. The Court of Appeal in Green and Rowley v Royal Bank of Scotland has confirmed that there is no common law duty of care to advise on the nature of the risks inherent in entering into swap transactions where the lender is only providing information, and not advice, on the transaction.

This case was one of the first swap mis-selling claims to go to trial and was dismissed at first instance. The claimants' appeal was heard by the Court of Appeal on 29 July this year but the written judgment has only recently been handed down.

Google: APPEAL RELATING TO ALLEGED MIS-SELLING OF INTEREST RATE SWAPS DISMISSED: GREEN AND ROWLEY V RBS

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