RBS installs blanket two-step redress payment system before consequential losses determined (Photo: Reuters)
The Royal Bank of Scotland will pay all customers, which were mis-sold complex interest rate swap agreements, redress payments before consequential losses are determined.
Following in the footsteps of HSBC, RBS said it has agreed with the Financial Conduct Authority (FCA) to "split redress payments for all customers mis-sold swaps (IRSA)."
"This means customers will receive their redress money without having to wait for any potential consequential loss claims to be resolved," said RBS in an emailed statement to IBTimes UK.
Previously under the FCA interest rate hedging product review, no payments could be made, from banks to customer, until the entire process of determining redress was completed.
This prevents a party being able to make claims over and over again and costing firms multiple sets of bills from fresh reviews.
The bank, which sold the contested product, firstly determines whether the IRSA has been mis-sold, with the help of an independent reviewer. It then calculates what redress to offer. The bank then offers the client a redress package, which can include anything from a refund of swap payments to a restructuring of a business loan at a better rate.
Consequential loss claims, which involve the party providing evidence that it incurred losses as a result of the IRSA, are filed separately.
This means that while a bank can make an initial redress offer - a product tear-up or switch and/or compensation - if a company is claiming for consequential losses on top of this, then it would have to wait until after the bank's have assessed the application for damages.
The FCA's chief executive Martin Wheatley said in a statement sent to IBTimes UK: "I welcome the move to pay compensation in two stages."
"I've been urging the banks to consider what more they could do to ensure the small businesses affected by swap mis-selling get the compensation they're owed as quickly as possible.
"The announcements over the last couple of days are a good first step."
HSBC was the first to announce that it plans to compensate all customers more quickly, in relation to the mis-selling of complex interest rate swap agreements, by using a new system that will pay firms redress before consequential losses are determined.
Lloyds stopped short of a blanket two-step system to pay redress to all customers but instead said it is implementing a case-by-case process.
Barclays has yet to deliver an official statement to IBTimes UK about whether it will be following the other banks' footsteps in amending its redress payment system.
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