Banks Fail Westover Hall

I am sure we have all heard this past week of the latest outrageous behaviour by our banking industry relating to Libor.

The following day, the FSA then announced more abuses, this time relating to the mis-selling of ‘interest rate swaps’.  Sadly, with the Libor scandal in the headlines this other bankers outrage has received much less publicity than it deserves.

I suspect most of us do not really understand the finer details of Libor or ‘interest rate swaps’, yet I am confident that all of us are disgusted at the blatant greed demonstrated by certain bankers.

I have been informed about a story on Sky News that has bought the real effect close to home.

Until recently, Westover Hall Hotel in Milford on Sea was owned and run by a charming professional couple, David& amp; Christine Smith. Just as the business was approaching the summer season, and its most profitable time of year, the establishment unexpectantly closed its doors.

Amidst significant local disappointment, I think most people guessed that this was the result of the business simply, and sadly, failing. It now transpires that there may have been more to the case.

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Below are some excerpts from the article by Jason Farrell, news correspondent of Sky News, which feature the experience of David & Christine:

The City watchdog has confirmed that thousands of small and medium sized businesses (SMEs) have been victims of a mis-selling scandal by Britain's high street banks. The Financial Services Authority (FSA) said that it has found "serious failings" in the sale of complex interest rate hedging products to some SMEs and has reached agreement with Barclays, HSBC, Lloyds and RBS to provide appropriate compensation where mis-selling occurred.

Interest Rate Swaps were marketed as protection for businesses against upward trends in interest rates, but claimants say they were not made aware of significant costs attached if rates fell. While the banks profited from these agreements, thousands of companies have found themselves facing huge fees associated with the swaps and enormous breakage costs if they want to get out of the deals.

Last August, a former swaps seller James Ducker told Sky News: "The way it was described once by one of my managers was, 'We give the customer an umbrella and when it starts raining we take it away.' Perfect, if rates go up, bank wins, if rates go down, bank wins."

Martin Wheatley from the FSA said: "For many small businesses this has been a difficult and distressing experience with many people’s livelihoods affected. Our work has focused on ensuring a swift outcome for these businesses that form such an important part of the economy.

There are still many questions over what happens now, especially for customers who lost their businesses due to swap agreements.

David Smith had been in the hotel business for over 35 years and believes he would still own the Grade II listed Westover Hall Hotel on the south coast, if his bank had not managed to get his signature on a piece of paper.

Mr Smith told Sky News: "The emphasis was on the fact that it was free anyway. Why should I worry about a free product that's going to protect me?"

His wife Christine added: "There were several phone calls to ask why we hadn't returned the paperwork and David didn't really want to sign it, but we decided that we had no option. We had a loan with the bank and we would do what the bank was advising us to do. I trusted the bank, I trusted them."

A report by a hedging expert shows the bank made thousands from the deal while David and Christine Smith ultimately lost their business.

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The FSA says some businesses could be in line for partial or full refunds, and I certainly hope this includes recompense from Barclays for all David & Christine have lost.

I remember the days when bankers were respected. It was even OK in the 1980’s when the ‘City Boys’ were making ‘loads of money’, they were lucky to have highly-paid jobs, and good luck to them for being bright, or well connected enough, to benfit from the opportunities. These were the now gone days when we believed our financial sector was doing good for our pensions, investments and the economy.

Today the casino banking sector seem to have lost all sense of morality, they wrecklessly gamble with the hard earned money of hard working honest people, and have now been exposed for selling us products that are not in our interest. Personal greed appears their sole motivation.

Sad, very sad.

Click here to read full Sky News Story