British banks look to be at the centre of another yet another scandal as the Financial Services Authority (FSA) revealed it has found 'serious failings' in the way lenders sold complicated interest rate protection products to businesses.
Some businesses claims they have been bankrupted by the liabilities they took on when entering the so called "swap" arrangements.
The BBC has named the banks involved as Barclays, HSBC, Lloyds and RBS.
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Lloyds has already issued a comment, saying it had "[...] assisted the FSA fully in relation to its review and has agreed to work with an independent third party to carry out a thorough assessment of sales of these products to certain customers."
The statement adds: "[...] the financial impact of this remediation and the associated costs are not expected to be material to the group."
Shareholders will be very worried though. On Wednesday Barclays shares dropped 15% after the FSA fined it £290m for manipulating the LIBOR interest rate.
The new scandal will bring to mind the billions banks have had to pay out following the mis-selling of payment protection insurance that emerged last year.
Businesses were sold the swaps as a way of protecting them from large swings in interest rates. Apparently, some were even told that without the swaps their credit rating would suffer. Instead, since interest rates have come down in the wake of the 2008 financial crisis, the businesses have been left with cripplingly high financing costs.
BS
