Customers should always be careful when considering alternative products as redress from the bank. The alternative products are based on an agreement between the bank concerned and the FCA. The agreement has not been disclosed to us, but what we do know is that the pricing of alternative products is based on information (yield curves) provided from the bank to the FCA.
It may be that the banks are trying to find a product where the premium or liability does not exceed 7.5% of the notional value of the IRHP on the date of trade, however, this may generate an on going liability to a customer who would never have bought an IRHP if the regulatory requirement had been complied with. We also suspect that the products being selected as alterative products have a generous profit built into them for the banks and may not equate to a open market or competitive price.
For example a bank may offer a retrospective cap of 5% traded in 2008 for £100,000 however it may be that you could have bought that for £30,000 in November 2008 if you had shopped around, that opportunity obviously having been taken away from you due to the banks failure to comply with their regulatory requirements at the time.
Did the FCA really consider the impact of alternative offers at the time of their agreement with the banks?
Another strange example is an exchange of a 10 year swap for a 5 year swap, apparently confirmed to be in line with the FCA ‘secret’ agreement but makes absolutely no sense when you consider the bank have assessed the initial sale to have breached the regulatory requirement by not disclosing risks and yet still believe a customer would have bought a product with a similar risk profile!
In order to assist our client’s and future clients we have sought clarification of the pricing models from the FCA. Anyone not represented who has been offered an alternative product should seek independent advice before accepting.
Slater and Gordon Lawyers can advise and assist people who have not received adequate redress, and can assist within the FCA Review or through litigation. Call our Litigation Lawyers on freephone 0800 916 9015 or contact us online and we will call you.
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