Small businesses could still be at risk from mis-sold interest rate swap agreements (IRSAs).
This is according to two separate reports into the ongoing mis-selling scandal. One suggests that a new wave of "baby toxic" products could threaten small firms, while the other warns that businesses could be denied compensation - with the cash instead going to the banks who mis-sold the products in the first place.
Bully Banks, an organisation that represents businesses that have been mis-sold swaps, has claimed that some of those firms are having their swaps changed for new products with a shorter term or of less size. The organisation refers to these products as "baby toxic", and is concerned that businesses are not being given the option to opt out.
Bully Banks chairman Jeremy Roe said: "Having won the up-front battle in establishing the principle of mis-selling there is real concern that small businesses could lose the war and fail to obtain the full and fair restitution due to them.
"Even more concerning for SMEs is the very real possibility that the banks may seek to substitute the IRSA that was mis-sold with another IRSA - a 'baby toxic' product as part of the redress process. We need strong guidance from the regulator that this will not be acceptable."
Meanwhile The Times reports that hundreds of small firms forced into administration as a result of the mis-selling could miss out on compensation.
Last week the newspaper pointed out that the banks could end up "compensating themselves as the new owners of the businesses." In many cases the banks will be the firms' biggest creditors, and will therefore be paid during the process of administration.
Bully Banks has been lobbying to stop this, and met with civil servants from the Department for Business, Innovation and Skills last week to seek assurances that business owners would receive compensation where it is due.
IRSAs were sold to businesses on the basis that they would protect against rises in interest rates - but, as rates have remained low, many firms have been required to pay out huge sums. Some commentators believe that banks will have to pay out compensation in the tens of billions. Read more about interest rate swap mis-selling.
Source: http://www.simplybusiness.co.uk/knowledge/news/2013/05/interest-rate-swaps-compensation/
This is according to two separate reports into the ongoing mis-selling scandal. One suggests that a new wave of "baby toxic" products could threaten small firms, while the other warns that businesses could be denied compensation - with the cash instead going to the banks who mis-sold the products in the first place.
Bully Banks, an organisation that represents businesses that have been mis-sold swaps, has claimed that some of those firms are having their swaps changed for new products with a shorter term or of less size. The organisation refers to these products as "baby toxic", and is concerned that businesses are not being given the option to opt out.
Bully Banks chairman Jeremy Roe said: "Having won the up-front battle in establishing the principle of mis-selling there is real concern that small businesses could lose the war and fail to obtain the full and fair restitution due to them.
"Even more concerning for SMEs is the very real possibility that the banks may seek to substitute the IRSA that was mis-sold with another IRSA - a 'baby toxic' product as part of the redress process. We need strong guidance from the regulator that this will not be acceptable."
Meanwhile The Times reports that hundreds of small firms forced into administration as a result of the mis-selling could miss out on compensation.
Last week the newspaper pointed out that the banks could end up "compensating themselves as the new owners of the businesses." In many cases the banks will be the firms' biggest creditors, and will therefore be paid during the process of administration.
Bully Banks has been lobbying to stop this, and met with civil servants from the Department for Business, Innovation and Skills last week to seek assurances that business owners would receive compensation where it is due.
IRSAs were sold to businesses on the basis that they would protect against rises in interest rates - but, as rates have remained low, many firms have been required to pay out huge sums. Some commentators believe that banks will have to pay out compensation in the tens of billions. Read more about interest rate swap mis-selling.
Source: http://www.simplybusiness.co.uk/knowledge/news/2013/05/interest-rate-swaps-compensation/
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