Member Article

High court decision to trigger new surge of interest-rate swap litigation

Threat to be debated at Manchester corporate recovery conference featuring Michael Portillo and hosted by JMW Solicitors

Banks could be hit with a new surge of litigation over interest-rate swap mis-selling following a High Court ruling, Manchester insolvency lawyers have suggested.

The team at JMW Solicitors say the High Court’s refusal to strike out a claim brought against Barclays Bank by Kays Hotels will provide re-assurance to businesses, who may have believed they had run out of time to seek redress, that they could still pursue a claim.

Barclays’ argument that the case should be struck out because the product had been sold to the family-owned business more than six years ago was rejected by the Court.

The Financial Conduct Authority (FCA) believes the bulk of mis-selling occurred in the pre-recession period up to 2008. Interest-rate swaps were sold to businesses in the years of growth ahead of the financial crisis to protect them from rising interest rates. However, the drastic fall in rates following the downturn saw the same businesses faced instead with significant monthly fees.

Richard Wolff, partner and head of corporate recovery and insolvency at JMW, said: “This case has set a precedent that the six-year period should only begin at the time that the customer became aware of the mis-selling and the loss that it caused. In many cases, significant cash flow was sucked out of businesses by punitive charges, as the interest rate plummeted from 4.5% in October 2008 to 0.5% in March 2009.

“After an initial spike of activity, the interest-rate swap mis-selling scandal has been a little uneventful from a litigation point of view, with many cases settling out of court. The new surge that we anticipate this decision will trigger could mean the £3.75bn the banks have already set aside for compensation needs to be inflated considerably going forward.”

The subject will be debated at JMW’s corporate recovery and insolvency conference held at the Lowry Hotel on Tuesday (10th June), where former conservative cabinet minister Rt Hon Michael Portillo will speak.

JMW has assembled a team of leading financial thinkers for the event including Abhishek Sachdev, managing director of financial consultancy Vedanta Hedging, and Jon Welsby, director at Insolvency Assist CIC.

For more information or to book a place at the conference, please contact Samantha Meakin, Marketing Manager at JMW by emailing marketing@jmw.co.uk or call 0161 828 1841.

This was posted in Bdaily's Members' News section by Ground Six .