The British Bankers’ Association (the “BBA”), a trade association for the UK banking and financial services sector, has announced a policy for ‘Major Banks’ which suggests such banks will consider rolling over swap payments pending a swaps mis-selling complaint or review.
This is certainly contrary to the past experience of this firm which has regularly seen (i) that clients who have requested a suspension of swaps payments have always been rejected by the banks without any evidence of reasoned careful thought or consideration and (ii) have only been able to stop swap payments by a declaration of rescission and change of banks (resulting in payments being added as an overdraft).
We shall be writing to the ‘Major Banks’ in due course (on behalf of individual clients) asking them to confirm this BBA press release is a statement of their own bank policy and whether they will suspend payments where clients have suffered financial distress which would continue or be exacerbated if payments were not suspended.
The full text of the BBA press release dated 11 December 2012 follows:
Interest Rate Swaps: Businesses in Financial Distress (major banks review process)
Businesses with interest rate swap arrangements which consider themselves to be in financial distress should contact their bank to discuss the situation.
The banks will review and consider each case carefully, and on a case by case basis, where the bank determines financial distress to be present in relation to meeting ongoing swap payments, the bank, will, at the customers request, suspend the collection of swap payments pending the outcome of the formal review by the independent skilled person being conducted in conjunction with the Financial Services Authority (FSA). In these circumstances when the bank agrees with the business to suspend swap debit payments from the business account, the suspension of payment does not constitute any acknowledgement of wrong doing on the part of the bank and the bank will reserve all its rights including with respect to the suspended payments and/or any other defaults.
The banks remain committed to addressing the Interest Rate Swap review as quickly and as fairly as possible with businesses and are working closely and cooperatively with the FSA and the skilled independent reviewers appointed by the FSA to do so.