Despite setting aside almost £3 billion to compensate businesses affected by the interest rate swap mis-selling scandal, the full bill Britain's banks must pay for mis-selling swap products won't be known for some time.
According to Martin Wheatley, Chief Executive of the Financial Conduct Authority (FCA) this is because the money set aside so far has been compensation to redress the amounts actually paid for the products, and not the ongoing consequential losses that have put thousands of UK SMEs out of business.
According to Wheatley the banks have yet to make a statement about any large amounts available to rectify consequential losses.
These consequential losses include loss of profits, loss of interest, bank charges, litigation fees and missed opportunities for firms to expand. By receiving not only financial redress for the cost of the swap products, but also compensation for the consequential losses, the banks would effectively be resetting the clock back to the point before the swap products were mis-sold.
This sounds good in theory but progress has been slow and there often remains a large disparity between the amounts offered and what customers expect and deserve.
Some critics have said that the small sums paid out so far suggest those firms who have received compensation have received little or nothing in the way of consequential loses.
Wheatley has said that it was unclear at this stage whether the full bill for interest rate swaps would match, or potentially exceed the £17 billion apportioned by the banks for PPI claims.
He told Reuters: "There is more uncertainty about consequential loss ... it's more complex and will take longer. It's hard to predict whether it will be bigger or not."
As the FCA points out: "Customers should note that claims for loss of profits, in particular, will take longer to review. For each consequential loss claim, the onus is on the customer to demonstrate that the 'legal tests' are met."
And this is an important point to note. The FCA has stated in the past that customers will "typically be offered 8% interest on top of their redress payments. We hope this means many customers can avoid having to put together consequential loss claims which are likely to take longer to assess".
Such a 'one size fits all' percentage approach might be welcomed by some customers, particularly if they had no intention of pursuing any consequential loss claim. It might also help to streamline the whole process and speed up redress for other customers. But each customer's circumstances are different and they need to be mindful of the legal test under the FCA's Scheme. That test is not based on applying a flat rate across the board, but on compensation for reasonably foreseeable losses caused by the mis-sold swap. For some, 8% interest will prove to be woefully inadequate compensation, and only time will tell whether there is 'enough in the pot' to cover such claims.
Andrew Brown is a Partner at Cardiff and London based law firm Capital Law www.capitallaw.co.uk. He is a specialist in financial disputes, including interest rate swaps.