Banks have been slower than expected in paying compensation to consumers mis-sold interest rate hedging products, according to the Financial Conduct Authority.
Banks have been slower than expected in paying compensation to consumers mis-sold interest rate hedging products, according to the [tag|fca|]Financial Conduct Authority[/tag].
The FCA said that "progress had been slower than expected" and that it had written to banks to make expectations clear and "agree practical ways to speed up the process".
Despite £3 billion ($4.8 billion) being set aside for compensation payments, data from the FCA revealed that only £15.3 million had been paid out so far, with only 125 offers accepted by customers.
To simplify and speed up the process for paying customers, the FCA has agreed with HSBC, RBS and Lloyds Banking Group to split payments for redress relating to the swap and consequential losses and has encouraged other banks to follow their lead.
Between 2001 to 2008, banks were selling interest rate hedging products to businesses that aimed to off-set or "hedge" against the future costs of interest charges going up. However, when interest rates fell in 2008, those that had signed up were faced with paying more for their loans.
In 2012, the FCA identified failings in the way that some banks sold interest rate hedging products and in May this year carried out a full review.
Although there has been a significant pick-up, the current rate of redress suggests that target of completing the whole process within 12 months of starting will not be completed.
"We gave the banks six to twelve months to complete their reviews from the start of the process in May and are frustrated that they are all expecting to meet the lower end of the FCA expectations," the FCA said.
While almost all the banks made more payments than expected in October, one bank fell short mainly because of operational challenges, the FCA said.