It was over five years ago when, in March 2009, the base rate was cut to a record-low of 0.5 per cent. Far from being an insignificant blast from the past – this event has been at the heart of a banking scandal that is still causing controversy today.
Prior to the base rate cuts many businesses were aggressively mis-sold complex financial products that were designed to protect them against interest rate rises; when things went the other way and rates actually dropped, they were left out of pocket. The Financial Conduct Authority (FCA) stated that the guilty banks would pay back billions of pounds to compensate for the mis-selling of hedging products such as interest rate swaps, but this has not proven successful.
Although £4 billion was put aside for settlement payments, the FCA revealed recently revealed that less than 40 per cent (£1.5 billion) of this has been claimed. Moreover, in December this year MPs discussed concerns that the repayment scheme was not doing enough.
One problem is that not enough individuals or businesses are coming forward to make a claim. Another is that claimants are not getting the correct amount of money owed to them. Forensic accounting can help with both these things by removing the complexities of making a claim for mis-sold financial products and demonstrating exactly how much should be paid to the claimant.
There are two areas where businesses can claim on mis-sold swaps. Firstly there is the basic redress, which offers a repayment of the costs of the financial product that was wrongfully sold to them in the first place.
Secondly there are repayments for consequential losses; these can be at a flat rate of eight per cent, a flat rate of eight per cent plus out of pocket losses or a calculated loss of earnings that the company suffered because of the mis-sold swaps. Calculating the full extent of consequential losses can be extremely complex. The experts at Frenkels Forensics have prepared many reports setting out the consequential losses suffered by several different businesses across a variety of industries.
For help in claiming on mis-sold hedging products contact Frenkels Forensics for an independent appraisal.
By Vitek Frenkel – find me via Google+.