One person with little reason to trust banks is British businessman Mike Lloyd, part owner of a group running 12 pubs in southern England.
He says Barclays insisted that, along with a business loan, his company make a so-called swaps arrangement to protect it from rising interest rates, without explaining that if rates fell, which they did, it would cost a lot.
He blames that for the failure of his business, which has now been put into administration by Barclays: “The penalty payments – of interest – were in excess of 300,000 pounds a year, and that lasted for over three years: so it actually cost us well over one million pounds in penalty interest.”
It is cases like that, as well as the Libor scandal, that have Mervyn King, the head of Britain’s central bank, criticising some in the financial world: “There must be many people who work in the banking industry today who know that they are honest and hard-working, and who feel that they have been let down by some of their colleagues and indeed their leaders.”
The Bank of England Governor added: “What I hope is that everyone now understands that something went very wrong with the UK banking industry and we need to put it right.”
In Mike Lloyd’s case, Barclays denied it had done anything wrong, but as with the Libor manipulation, it and other banks now face big claims for compensation.
The British watchdog, the Financial Services Authority, is considering whether to launch a full investigation into such ‘swaps’ arrangements to see if some of them may have been mis-sold.