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UK banks face more payouts because of mis-sold mortgages

19 Apr

Banks in the United Kingdom are facing more payouts to the British public after research found that numerous banks had mis-sold unnecessary interest-rate hedging items to small and medium sized companies.

The UK’s monetary guard dog the FSA (Financial Services Authority) have found that over 90 % of the 173 interest-rate swap test cases did not abide by regulatory agreements set out by the company.

This is the latest information in a series of costly setbacks for British banks after numerous insurance strategies were mis-sold on home loans and loans.

These breaches of FSA standards have become commonplace in the financial sector after banks were forced to set aside millions of pounds to compensate for mis-sold Repayment Defense Insurance (PPI).

The FSA has stated that compensation is due for the previously mentioned products sold to lots of small businesses. Barclays, HSBC, RBS and Lloyds have been negativelied affecting by these claims and have reserved millions to pay back businesses throughout the UK.

These specific ‘rate-swap’ items were supposedly produced to secure companies against an increase in rate of interest, however when these rates reduced they were forced to pay considerable costs.

The FSA has claimed that over forty 40,000 of these suspicious products have been mis-sold to small businesses. This is partially due to the aggressive sales culture urged by banks where their own staff are frequently pressed to strike targets on a continuous basis.

This particular study carried out by the Financial Services Authority was launched last year after it found exactly what it described as ‘serious failings’ in lots of banks’ approach to selling products.

The FSA clarified that it has actually now altered the policies and policies that allow firms to target small businesses, these businesses are believed to frequently misunderstand the nature of the items that are sold to them and are prone to being mis-sold possibly devastating products.

It’s been recommended that banks have actually continually attempted to capitalize on the susceptibility of small companies who are uninformed of exactly what they’re really purchasing, small companies are likewise extremely unlikely to have their own legal division or legal proficiency.

As a result banks will need to set aside much more cash, to compensate for these fraudulent items.

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The end of the Financial Services Authority, What does this mean for financial firms?

18 Apr

The FSA is set to be eradicated in April, what effect will this have on the financial services market, if any?

A quick history of the FSA

The judicial body is responsible for controlling the monetary services market, although it runs individually of the government, its members are selected by the government.

Formed in 1985, the FSA is structured as a company restricted by guarantee and is funded completely by costs charged to the finance industry, it presently utilizes almost four thousand staff members.

It exercises its powers based on the Financial Solutions and Markets act of 2000, in addition to managing the activities of banks, insurance companies and monetary advisers the authority also controls the financing of mortgages by major financial firms.


Chancellor the Exchequer, George Osbourne revealed plans to re-organise the service, basically eliminating it by separating its services between a variety of agencies as well as the Bank of England.

On the first of April this year the FSA will be removed and replaced by a new regulatory regime. The government suggested that this choice was based upon the authority’s failure to deal with the monetary crisis in recent years.

According to the government the governing body will have boosted powers over the financial sector, this is largely due to demands by the public for tighter restrictions to be placed on the task of the banks.

Whether these brand-new regulating bodies will have the preferred impact continues to be to be seen, it will certainly be interesting to see how these brand-new authorities will deal with claims against monetary services over the mis-selling of payment protection insurance and the recent interest-only loans.

These new governing authorities will be under pressure to enhance on previous results and take swifter and more serious action against the mis-selling of items by different major financial authorities.

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Are Interest-only loans the next PPI?

18 Apr

We’re all familiar with the much maligned payment protection insurance scandal with banks needing to set aside billion of pounds to pay back the general public, in what was a highly damaging and humiliating scandal for lots of monetary companies.

Customers were unnecessarily sold this kind of insurance and were often mis-informed as to the nature of the product, most of the customers did not require or need this kind of insurance.

Now financial experts are claiming that interest-only loans will be a financial scandal of similar proportions.

These loans, which include the borrower accepting to pay off the interest each month without the capital quantity.

Martin Wheatley. Previous supervisor of the Financial Solutions Authority (FSA) declares that these interest-only loans are a “ticking time bomb”. The FSA is typically held responsible for dealing with concerns against major financial services and controls the regulation that control the behavior of lending services.

The FSA runs separately from the government, although its members are appointed by the Treasury.

Many members of the public might be uninformed that they are entitled to a case if they were mis-sold this kind of loan or mis-informed about the process.

As a result lots of cases management companies have actually switched their focus from the mis-selling of PPI to the mis-selling of interest-only loans. Claims management business declare that customers/borrowers were not checked appropriately and it was not clarifies that clients would have the ways to repay the debt.

Cases management services are set to face an increase of cases this year as many clients may seek further guidance on the topic, it’s plausible that many people might have the chance to claim significant quantities of cash must they have a case.

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