Barclays has been accused of acting with "reckless disregard" when it sold a set of complex derivatives to a care home operator that is suing the bank for £36m.
The claims against Barclays are in an independent report prepared for Guardian Care Homes [GCH], which operates a 30-strong chain of homes, by derivatives experts at JC Rathbone Associates.
In the report, which was paid for by the company and will form a central part of GCH's case, the bank is accused of selling derivatives where the advantages were "outweighed by the risk of incurring significant termination costs".
News of the report is the latest blow to UK banks following the Telegraph's investigation into the alleged mis-selling of interest rate derivatives.
The report alleges that the terms of the loan posed "a risk of breach of covenant" while also claiming that the hedges sold to GCH were never likely to have protected it against rising interest rates.
Sources close to Barclays have countered that GCH received advice from investment bank Rothschild before taking out the hedges and was experienced in complex financial products in its own right.
The company has denied this was the case and said Rothschild was only advising it on a potential stock market flotation. Barclays in a statement last week said: "This action is completely without merit and we will contest it vigorously.
Barclays is satisfied that it provides sufficient information to enable a client to make an informed, commercial decision about the products it offers.
"On Friday, Bob Diamond, chief executive of Barclays, was challenged directly by a shareholder who claimed he had been mis-sold an interest rate swap by the bank.
Mr Diamond said the number of complaints was "very small", but admitted "mistakes" were likely to have been made.
"I can guarantee you in some cases we have made mistakes. It's going to happen when we do thousands of transactions.
When we make a mistake we're going to own up to it and we're going to fix it," he said. All of the UK's largest banks have been accused of mis-selling interest rate swaps.
They deny the allegations. The Financial Services Authority is reviewing the claims and has met with businesses that claim to be victims.
The regulator is expected to complete its review next month after which it will decide whether a formal investigation is justified.
The Government is also under pressure to act on the issue. Chuka Umunna, the shadow business secretary, tweeted today: "Why the defeaning silence from Vince Cable on the mis-sellilng of interest rate hedging products?"
telegraph.co.uk
The claims against Barclays are in an independent report prepared for Guardian Care Homes [GCH], which operates a 30-strong chain of homes, by derivatives experts at JC Rathbone Associates.
In the report, which was paid for by the company and will form a central part of GCH's case, the bank is accused of selling derivatives where the advantages were "outweighed by the risk of incurring significant termination costs".
News of the report is the latest blow to UK banks following the Telegraph's investigation into the alleged mis-selling of interest rate derivatives.
The report alleges that the terms of the loan posed "a risk of breach of covenant" while also claiming that the hedges sold to GCH were never likely to have protected it against rising interest rates.
Sources close to Barclays have countered that GCH received advice from investment bank Rothschild before taking out the hedges and was experienced in complex financial products in its own right.
The company has denied this was the case and said Rothschild was only advising it on a potential stock market flotation. Barclays in a statement last week said: "This action is completely without merit and we will contest it vigorously.
Barclays is satisfied that it provides sufficient information to enable a client to make an informed, commercial decision about the products it offers.
"On Friday, Bob Diamond, chief executive of Barclays, was challenged directly by a shareholder who claimed he had been mis-sold an interest rate swap by the bank.
Mr Diamond said the number of complaints was "very small", but admitted "mistakes" were likely to have been made.
"I can guarantee you in some cases we have made mistakes. It's going to happen when we do thousands of transactions.
When we make a mistake we're going to own up to it and we're going to fix it," he said. All of the UK's largest banks have been accused of mis-selling interest rate swaps.
They deny the allegations. The Financial Services Authority is reviewing the claims and has met with businesses that claim to be victims.
The regulator is expected to complete its review next month after which it will decide whether a formal investigation is justified.
The Government is also under pressure to act on the issue. Chuka Umunna, the shadow business secretary, tweeted today: "Why the defeaning silence from Vince Cable on the mis-sellilng of interest rate hedging products?"
telegraph.co.uk
No comments:
Post a Comment