28 January 2014 by

New Year cheer for swap mis-selling victims

It appears that there is at last some cause for optimism in the area of mis-sold interest rate derivatives.

First, December 2013 figures released by the Financial Conduct Authority (the “FCA”) show that the rate at which the major banks are compensating victims is increasing, with significant numbers of complainants receiving redress offers and many others progressing well through the various stages of the compensation process. Click on the link below for a detailed progress report.

http://www.fca.org.uk/consumers/financial-services-products/banking/interest-rate-hedging-products

Second, in a recent letter to the Treasury, Martin Wheatley – the chief executive of the FCA – has admitted that the compensation scheme may need to be extended to capture derivative-embedded loans.  At present, stand-alone interest rate derivatives that sit outside of and operate alongside a loan agreement are regulated by the FCA – and are therefore eligible for compensation under the scheme – but the same products embedded within individual loan agreements are not.  This is an illogical state of affairs and Wheatley’s admission is to be applauded.  If it leads to action by the Treasury and in turn by the FCA, it opens the door to tens of thousands more complainants who are currently ineligible for compensation and acts as an inhibitor to banks who view derivative-embedded loans as a means to circumvent the current regulatory regime.  In any event, in circumstances where the FCA are unable to broaden the scope of the review, the failure by the banks to properly explain the effect of the embedded derivatives may give rise to a claim that can be pursued through the court process.

This revelation piles further pressure on the banks who have already subscribed to the review, but beyond that, it is particularly bad news for Yorkshire and Clydesdale Bank.  Until now the fully owned subsidiary of National Australia Bank appeared to have avoided the interest rate derivate mis-selling scandal unscathed. However, it is believed to have sold significant numbers of derivative-embedded loans to its customers over the past decade and is therefore likely to be looking over its shoulders over the coming months.

As to the defining features of such loans, the key to recognising one lies in the interest calculation provisions.  If interest is calculated on a fixed, capped or collared basis, then the loan is ‘derivative-embedded’ and, on an early repayment or following an event of default, break costs will arise in exactly the same way as they do under a stand-alone derivative.

If you are unsure as to whether your loan contains an embedded derivative, or if you need advice in relation to an interest rate derivative, please contact one of our specialist team today Gary Walker on 020 7288 4783 or by email at garywalker@boltburdon.co.uk or Simon Bishop on 020 7288 47 or email simonbishop@boltburdon.co.uk.

10 December 2013 by Sonal Ghelani

It never rains but it pours!

As from 3rd December 2013, the Environment Agency will make official maps showing areas at risk of surface water flooding by post code available on its website. Where there is a risk it will be shown as high, medium or low. The maps are however not property specific.

3 January 2014 by

Property Alert!

It is an unfortunate reality, but one of the by-products of a more healthy property market (and commercial property is certainly on the rise) is an increase in property fraud.

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