Interest Rate Derivative Projects have been one of the key emerging areas for our associates working in Business Review. Lloyd Whiting looks at how the review is going thus far, and shares his expectations for the future of Interest Rate Derivative Projects.
One of the strongest emerging areas for our associates working in Business Review over 2013 has been Interest Rate Derivative Projects. The FCA identified the extent of the mis-selling in 2012, with reviews heading back to 2001.
Following pilot ways of reviewing as set out by the FCA, agreed processes were implemented by various banks to redress and rectify the issue. By the mid of 2013, the review was under full swing and continues to be a major focus for the banks and our associates.
How do the stats add up so far?
The FCA has given detailed report findings to map out how the review is going thus far. Customer opt in rate has increased by 54% which is due to the amounting media around the issue, as well as the increasing transparency of the banks to perform redress for their customer base. The overall rate of non-compliant sales has remained fairly steady at 95% and so far 6100 customers are in redress phase, a three fold increase from August 2013.
However, so far, 547 customers have accepted their rebate, whereas there are 438 outcomes where no redress was due. This is a closer than expected amount. The total amount of redress paid is £81.2 million, a huge increase from the initial redress amount of £0.5 million.
So how has the review really gone to date?
At this relatively early stage, it is still hard to determine. The FCA wrote to CEOs of the major banks involved to re-establish their expectations that the reviews would be completed in the interests of the customer and in a speedy manner. The response has thus been positive. The banks have agreed to be completely transparent in regards to their plans, and have already issued their projections.
However, it has also been highlighted that customers need to make themselves known to the bank in turn, and for those that have been approached, there are still 4000 customers to opt in. Low risk customers will be offered an initial full redress, which will still be checked by a reviewer. Consequential loss and initial redress payments will also be split to speed up processes. The straight forward nature of the redress processes is to diminish further financial distress to customers.
What does the future hold?
IRHD projects are likely to hold sway for the foreseeable future. The amount of customers under redress is constantly on the increase, and further focus on the expansion of redress teams will likely increase the amount of contractors and perm staff a like working in this area of review.
To make sure the projects are as successful as possible means continuing the transparent nature of the banks relationships to the projects themselves, as well as towards their customers. The area is also still likely to prove a focus for our associates and Grovelands alike throughout 2014.