Barclays to pay £1bn for mis-sold products

European banks sold about 40,000 derivatives to “non-sophisticated” customers since 2001, says FSA.

New Statesman
Photograph: Getty Images.

The British investment bank Barclays said that it set aside £850m to redress the mis-sale of interest rate hedges, and a further £600m to pay off those who were sold payment protection insurance.

With the increase of funds, Barclays now faces a total bill of more than £3.4bn related to the mis-sale of products.

The Financial Services Authority (FSA) has ordered Barclays, HSBC, Royal Bank of Scotland (RBS) and Lloyds to review all their sales of interest rate hedging products, including swaps and complicated instruments. The banks so far had set aside just £700m as likely compensation to customers for the products.

In its pilot study study of 173 interest rate products, the British regulator FSA found that nine out of 10 products sold to small and medium-sized businesses by the four European banks failed to meet regulatory requirements and that a “significant” portion of customers should receive compensation.

Britain’s biggest lenders have already set aside around £12bn in compensation for customers who were mis-sold payment protection insurance.

Barclays and UBS have already paid nearly £1.3bn in penalties related to the Libor scandal, while RBS is expected to settle with US and UK authorities in the near future.

In addition, Barclays’ finance director Chris Lucas and general counsel Mark Harding have resigned on Sunday amid the mis-selling scandals and an investigation of the bank’s capital-raising efforts during the financial crisis in 2008.