By Marietta Cauchi
LONDON--Barclays PLC's (BCS) disclosure Friday of a 450 million
pound ($704.8 million) provision to redress customers that had been
missold interest-rate hedging products comes as the other three
major U.K. banks report earnings that will likely reveal further
disclosures on the issue.
Barclays, together with HSBC Holdings PLC (HBC), Royal Bank of
Scotland Group PLC (RBS) and Lloyds Banking Group PLC (LYG), last
month agreed with the Financial Services Authority to settle claims
in connection with "serious failings" in the sale of the
derivatives.
Lloyds said at the time that the financial impact of redressing
its customers and associated costs wouldn't have a material
financial impact on their business. Reporting first-half results
Thursday, Lloyds repeated that the costs were expected to be
immaterial without giving details.
HSBC and RBS, neither of which has given any indication of cost,
report Monday and Aug. 3, respectively. A representative for HSBC
declined to comment Friday but said there might be an update
Monday. A representative for RBS wasn't immediately available for
comment Friday.
The FSA's probe of the U.K. banks found that a total 28,000
interest-hedging products had been missold by the four banks. These
products ranged in complexity from comparatively simple "caps" that
fixed an upper limit to the interest rate on a loan, through to the
more complex derivatives such as "structured collars" which fixed
interest rates within a band but introduced a degree of interest
rate speculation.
The FSA didn't specify at the time what proportion of the
products comprised the more complex derivatives nor how many
products each of the banks sold. An FSA spokesman Friday declined
to give further details or to comment on the amount it would cost
the remaining three banks to redress customers.
"It is up to the individual banks themselves to provide redress
and assess costs," he said.
Earlier this week, the FSA said seven more banks had agreed to
examine whether they sold small businesses inappropriate financial
products better suited to speculating in interest rate
movements.
The banks involved include Allied Irish Banks PLC (ALBK.DB),
Bank of Ireland (BIR.DB) and the U.K. arm of Spain's Banco
Santander S.A. (SAN.MC) will review the sale of interest rate swaps
and other derivatives to business customers, as will Clydesdale
Bank and Yorkshire Bank, both units of National Australia Bank Ltd.
(NAB.AU), the Co-operative Bank and Northern Bank, a unit of Danske
Bank A/S (DANSKE.KO).
These banks won't be probed by the FSA but will hire an
independent reviewer to report on sales.
"The big four U.K. banks made up the bulk of the market--the
other seven banks only sold an additional 3,000 or so products,"
the FSA spokesman said.
-Write to Marietta Cauchi at marietta.cauchi@dowjones.com
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