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Financial Services round-up

A brief round-up of developments of interest in the financial services field, including an update on the recently published FOS complaints data  and the on-going fall-out following the LIBOR scandal.

FOS release complaints data

In May 2013 FOS released its annual review of 2012/13. During the year, the FOS received a total of 2,161,439 new complaints and enquiries, resulting in 508,881 complaints, a 92% increase on the previous year. 62% of the total number of cases came from four banking groups (out of more than 100,000 businesses covered by the Ombudsman). Complaints about PPI (378,699 cases) made up 74% of the total complaints received by the Ombudsman. Complaints about investments and pensions (19,834 cases) made up only 4% of total complaints, but this represented an increase of 33% on the previous year, contradicting a previous downward trend.

LIBOR – tip of the iceberg?

As reported in our pervious Update, the LIBOR scandal continues to develop at pace, receiving special attention in the media, the courtroom and our Financial Services Seminar.

Amidst high-profile media reports of various bankers being arrested and fines being levied on banks, the FSA also came under scrutiny for launching an investigation so late in the day. Its own internal report, released before it was replaced by the FCA earlier this year, found that it had been aware of “severe dislocation” in the LIBOR markets as long ago as summer 2007, well before it finally launched an investigation in 2010. The FSA blamed the delay on being preoccupied with the financial crisis and having no formal regulatory responsibility for LIBOR.

Litigation has unsurprisingly followed and in England the leading case in the area, Guardian Care Homes v Barclays, (listed as one of the top 20 cases of 2013) which the Claimant seeks £70m from Barclays for allegedly mis-selling interest rate hedging products based on LIBOR. The case is presently due to be heard next April after Mr Justice Flaux allowed the Claimant to make allegations of fraudulent misrepresentation by the bank over the LIBOR element of the claim. The Court of Appeal is currently considering that decision and it may therefore still take some time for this test case to be resolved. In the meantime, a federal judge in New York last month rejected a claim that banks conspired to manipulate rates in violation of competition law.

The implications of the LIBOR scandal are being felt far and wide as trillions of dollars of financial instruments are indexed to LIBOR, from simple mortgages to complex derivative contracts and interest-rate swaps.  As Andrew Gregory highlighted at our Financial Services Seminar, alleged misspelling of interest rate swaps and related products is widespread. Barclays, HSBC, Lloyds and RBS/NatWest have already agreed with the FCA to compensate some investors and review the sales that were made to others. Many claims therefore appear to have settled behind closed doors, especially involving non-sophisticated consumers, although the few reported cases to date seem largely to have been decided in favour of the banks. Further claims may follow against those advising on the transactions in question, such as lawyers and corporate finance advisers, so the ramifications of this scandal seem likely to be felt for some time to come.

Contact

For more information contact Jonathan Hyde, Senior Associate on 020 7280 8927 or email jonathan.hyde@dwffishburns.co.uk

By Jonathan Hyde

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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