Mis-selling scandal: what really went on in the banks

Q: What were the banks playing at?

A: "It was a combination of things. Swaps are massively profitable and SME customers are easy targets. They are cornered. They need the loan badly, so you insist on a hedge. Get a smart-suited 'risk adviser' (meaning salesman) to explain the protection and that there's no fee (that means we make bigger profits by the way) and job done.

"As for the downside risks, well hedging is good if you get it right. Many of these things were too complex and increased the customer's risk, so they weren't suitable. Banks could easily have shown this.

"To be honest, we never thought rates would drop so low and that's caused much of the problem. But greed is important, too. The sales people probably got between 10 and 30% of the profit in bonuses (depending on the bank). So if you sell £1 million a year, it's good money on top of your wage."

Q: Any idea how many products could have been mis-sold? The FSA's estimate of 28,000 is thought to be conservative.

A: "Much more than that."

Q: What's the feeling now within the banks about redress for those mis-sold? It's going to cost billions isn't it?

A: "Yeah, it will cost loads. The banks worry about losing a court case, that's why they settle and gag the client.

"Banks are telling staff not to trade the 'exotics' now as they know some expert might pull it to bits in court.

"The feeling is mixed from 'buyer beware', which is quite tough, through to genuine sympathy.

"The Top Brass are seriously unhappy - they have no idea what really goes on and they will not pay the personal price. Instead, they'll just fire some junior employees and pay the fine (which is only a fraction of the profits by the way)."

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