Loans and Finance

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Monday, April 30, 2012

Barclays Accused of "Reckless Disregard"

An independent report prepared for Guardian Care Homes (GCH), which operates 30 care homes, by derivatives experts at JC Rathbone Associates accuses Barclays of "reckless disregard" over its sale of a set of complex derivatives to GCH.

GCH are suing Barclays for £36M, and the report will be used in its case against the bank.

The Telegraph notes that the report alleges that the terms of the loan posed "a risk of breach of covenant", while also claiming that the hedges sold to GCH were never likely to have protected it against rising interest rates.

Barclays in a statement last week said:
"This action is completely without merit and we will contest it vigorously. Barclays is satisfied that it provides sufficient information to enable a client to make an informed, commercial decision about the products it offers."
On Friday, Bob Diamond, CEO of Barclays, said the number of complaints was "very small", but admitted "mistakes" were likely to have been made.

The banks marketed these products as protection against potential higher future costs, the products do not do this. It would have been in the hapless purchasers' interests to take out a simple to understand fixed rate loan. Unfortunately, for the hapless customer, the commission earned by the banks on these complex financial products were higher.

I will leave you with the thoughts of Bob Diamond, 3rd November 2011:
"The only way that banks will win back the public's trust is to become better citizens. That starts with how we behave, and in demonstrating we act with trust and integrity. 

At banks this means the interests of customers and clients must be at the very heart of every decision made."
How very true!  

1 comment:

  1. I couldn't agree more with the quote by Mr. Diamond. In order for banks to earn the trust, they need to start behaving likea moral citizens.