Barclays, Royal Bank of Scotland and another two major British banks are due to pay their clients financial compensations up to 5 billion pounds in value for the incorrect sales of financial derivatives to small companies.
The banks, among which we find also Lloyds Banking Group and HSBC Holdings, approved a budget of almost 740 million pounds in order to cover the compensations owned to their clients, but analysts consider this is just the beginning and the compensations should be higher, since the British Financial Services Authority stated they found evidence of foul play and serious infringements in selling financial products, Bloomberg says.
The complaints against British banks may turn again in a new very costly scandal for them, as they are still paying for other misbehavior related to the faulty assurance selling for personal loans.
In 2011, the British Financial Services Authority practically condemned Barclays to pay 7.7 million pounds – the largest fee ever registered for bank indemnities – in order to compensate its deficiencies linked to their retail banking practices. Moreover, the control organism asked the bank to reimburse the major loses caused to their clients, estimated to almost 60 million pounds. The funds, Balanced Fund and Cautious Fund, with an accumulated value of 825 mil. euro, were created in 2006, and 2008 respectively, and sum up almost 12.300 clients.
Barclays didn’t respect its part of the deal, “forgetting” to make sure these funds are according to their private investors’ needs, considering most of them were looking to ensure their income for their retirement plan.
This year, Barclays may be subjected to pay up to 2,5 billion dollars in order to compensate the clients who bought derivative instruments from them. HSBC and RBS might face the painful fact that they should pay between 500 million lire and 1 billion pounds, while Lloyds somewhere between 250 million pounds and 500 million, according to the same sources.