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Interest rate swap mis-selling scandal: Difference between revisions
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{{a|disaster|}}{{quote| | {{a|disaster|{{image|Interest Rates|png|Bank of England Interest Rates in our lifetimes. Annotated.}}}}{{quote| | ||
Nine banks including Lloyds, RBS and HSBC agreed in 2013 to compensate companies that were sold inappropriate products that were supposed to protect them from changing interest rates on their debts. However, these hedges could expose the firm to the risk of rate movements even after their initial loan had been repaid. | Nine banks including Lloyds, RBS and HSBC agreed in 2013 to compensate companies that were sold inappropriate products that were supposed to protect them from changing interest rates on their debts. However, these hedges could expose the firm to the risk of rate movements even after their initial loan had been repaid. | ||
:— {{plainlink|https://www.telegraph.co.uk/finance/rate-swap-scandal/11402982/Companies-let-down-by-interest-rate-mis-selling-redress-say-MPs.html|''Daily Telegraph''}}, 10 February 2015}} | :— {{plainlink|https://www.telegraph.co.uk/finance/rate-swap-scandal/11402982/Companies-let-down-by-interest-rate-mis-selling-redress-say-MPs.html|''Daily Telegraph''}}, 10 February 2015}} | ||
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In 2008, interest rates plummeted and thousands of customers found the [[mark-to-market]] value of their [[IRHP]]s materially changed, leaving them with significant losses if those IRHPs terminated early. Alternatively, customers were tied in under the IRHP contracts to pay far higher interest rates than the prevailing market rate for years to come; in some cases the IRHP contract terms extended well beyond the period of the underlying loan. | |||
:— Swift Review into the supervisory intervention on interest rate hedging products | |||
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====The interest rate environment in the early 2000s==== | |||
====The banks==== | |||
{{drop|S|kulduggery in the}} [[LIBOR rigging|LIBOR submission process]] was not the only saucy carry-on in the interest rate market. For something that is meant to be dullsville, after school chess club was quite the hotbed. | {{drop|S|kulduggery in the}} [[LIBOR rigging|LIBOR submission process]] was not the only saucy carry-on in the interest rate market. For something that is meant to be dullsville, after school chess club was quite the hotbed. | ||