Interest rate swap scandal: Banks face hidden bill of up to £10bn to settle property developer claims


Britain’s banks face a hidden bill of up to £10bn to settle claims from property firms put at risk by the interest rate swap scandal, according to new research.

Many of the country’s best-known banks, including Royal Bank of Scotland, Barclays and HSBC, have been hit with more than 30,000 cases from small businesses over the sale of controversial financial packages.

Among those, thousands of property developers could receive compensation and better lending terms worth between £5bn and £10bn if they drop the cases, according to property services specialist DTZ.

In the most detailed analysis of the scandal so far, DTZ estimated that as many as one in five commercial borrowers could have a valid claim over mis-selling.

Lenders have already put aside provisions of nearly £3bn to cover the mis-selling cases.

Those making claims against the banks range from some of Britain’s smallest companies to multi-millionaire businessmen such as Lord Sugar.

Data provided to DTZ of nearly 70 out-of-court settlements worth £104m showed that on average claimants received a package worth £1.5m each.

Hans Vrensen, global head of research at DTZ, said: "What these figures brought out is the quite significant mismatch between the loans taken out by borrowers and the swaps sold to them."

The Financial Conduct Authority (FCA) last week revealed that only ten of more than 30,000 small business victims have so far officially received redress from banks.

The average payout in those cases was around £50,000 each, according to the regulator’s figures. Royal Bank of Scotland is potentially the most exposed bank, with more cases than Barclays, Lloyds Banking Group and HSBC combined.

The regulator’s compensation scheme has controversially excluded thousands of claims on the basis that certain businesses were sophisticated enough to know the risks.