Banks agree payout for losses incurred over misleading rates hedges

By Hazel Sheffield
14 Oct 2014

Nine banks have agreed to pay £1.5 bn to cover losses linked to interest rate hedging products that were sold to private customers and retail clients since 2001. Many of the products were sold to small and medium enterprises on the understanding that they would hedge against interest rate movements on loans. When rates fell, however, some customers found themselves paying higher fees and facing large break costs to get out of contracts.

A full review of interest rate hedging products was launched by the Financial Conduct Authority in May 2013 after such failings were identified. Nine UK banks were involved in the review. Such hedging products in the review included swaps, caps and collars.

Of these, Royal Bank of Scotland ...

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