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LONDON, Oct 23 (Reuters) - Britain's financial regulatortold banks on Wednesday to speed up compensation for complexhedging products they mis-sold to small firms that are nowfinding it hard to stay in business.
Banks have paid out just 2 million pounds ($3.2 million), afraction of the three billion pounds they set aside tocompensate for unsuitable swaps that were sold, in the yearsleading up to the 2008 financial crisis, to insure companiesagainst interest rate hikes.
Interest rates actually fell, forcing small firms to pay outtens of thousands of pounds.
"In a situation where many small employers who took outthese products may be struggling to make ends meet, the industryis deceiving itself if it imagines that a total of 32 offersaccepted, totalling two million pounds, is adequate progress,"Financial Conduct Authority (FCA) Chief Executive MartinWheatley said.
"A very good option in what is now a very fluid situation isto follow the positive lead set by some banks, by payingcompensation in separate stages, effectively fast trackingcompensation payments," Wheatley says in a speech to bedelivered in London later on Wednesday.
Announcements by Lloyds and HSBC in recentdays that they will speed up compensation were a good firststep, Wheatley said.
Lloyds said it has reviewed 99 percent of transactions.
"We have confirmed to the FCA that we will, on a case bycase basis for customers in financial distress, offer to pay anyredress due in relation to historical payments before anyconsequential loss claim has been outlined by the customer andagreed with them," Lloyds said in a statement.
Data from the FCA this month showed that RBS to havemore claims under review than Lloyds, Barclays and HSBCcombined.
