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Amortising Base Rate Swap

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    Amortising Base Rate Swap

    "Michelin-star restaurateur Sami Wasif claims RBS rate swap has cost him £200,000

    London restaurant entrepreneur Sami Wasif, who was the main financial backer of Hakkasan, said the state-owned bank had sold him a 10-year swap in 2004 without asking for his permission and that it has so far cost him £176,706.

    Mr Wasif said he only discovered the existence of the “Amortising Base Rate Swap” in February, eight years after he took out the £1.2m loan it was attached to, after noticing discrepancies in his bank account.

    “No one would dare think their bank could do anything wrong like that,” said Mr Wasif, who added he was not satisfied with the way his complaint has been handled by RBS.

    “I’m a very clever businessman. I know how to run my businesses very well, but with a complex financial product that is not my talent.”

    In a letter dated July 4, NatWest, owned by RBS, rejected Mr Wasif’s complaint and added that it did not think he could take his case to the Financial Ombudsman Service as he would not meet its entry criteria

    “NatWest regrets that Racecorp [Mr Sami’s investment vehicle] have felt the need to complain. However, NatWest does not accept the complaint,” wrote Geraint Rogers, head of risk solutions.

    The letter argued that Mr Wasif had been warned about the costs of the swap and that because the product was sold before the introduction of the Financial Services Authority’s introduction of so-called “Conduct of Business” rules in November 2007, he was not covered by them. "

    Michelin-star restaurateur Sami Wasif claims RBS rate swap has cost him £200,000 - Telegraph

    You can't make this up really!

    In related news:

    "RBS pays more than £25m to businessman David Agar over interest rate swaps" -

    RBS pays more than £25m to businessman David Agar over interest rate swaps - Telegraph

    Not doing due diligence in such a large sized loan, wtf?

    Or maybe the headline loan rate looked very cheap so nobody bothered to read fine print? It's like getting a "free" iPhone as long as agreeing to a long term contract

    #2
    Originally posted by AtW View Post
    "Michelin-star restaurateur Sami Wasif claims RBS rate swap has cost him £200,000

    London restaurant entrepreneur Sami Wasif, who was the main financial backer of Hakkasan, said the state-owned bank had sold him a 10-year swap in 2004 without asking for his permission and that it has so far cost him £176,706.

    Mr Wasif said he only discovered the existence of the “Amortising Base Rate Swap” in February, eight years after he took out the £1.2m loan it was attached to, after noticing discrepancies in his bank account.

    “No one would dare think their bank could do anything wrong like that,” said Mr Wasif, who added he was not satisfied with the way his complaint has been handled by RBS.

    “I’m a very clever businessman. I know how to run my businesses very well, but with a complex financial product that is not my talent.”

    In a letter dated July 4, NatWest, owned by RBS, rejected Mr Wasif’s complaint and added that it did not think he could take his case to the Financial Ombudsman Service as he would not meet its entry criteria

    “NatWest regrets that Racecorp [Mr Sami’s investment vehicle] have felt the need to complain. However, NatWest does not accept the complaint,” wrote Geraint Rogers, head of risk solutions.

    The letter argued that Mr Wasif had been warned about the costs of the swap and that because the product was sold before the introduction of the Financial Services Authority’s introduction of so-called “Conduct of Business” rules in November 2007, he was not covered by them. "

    Michelin-star restaurateur Sami Wasif claims RBS rate swap has cost him £200,000 - Telegraph

    You can't make this up really!

    In related news:

    "RBS pays more than £25m to businessman David Agar over interest rate swaps" -

    RBS pays more than £25m to businessman David Agar over interest rate swaps - Telegraph

    Not doing due diligence in such a large sized loan, wtf?

    Or maybe the headline loan rate looked very cheap so nobody bothered to read fine print? It's like getting a "free" iPhone as long as agreeing to a long term contract
    This is rubbish. An interest rate swap is a simple product. Also, the user has locked in a fixed interest rate, so he's only "lost" by not benefitting from falling interest rates. He "won" when they were rising but his payments did not go up...this man is pleading naivety , with his hands up and crying "I know nothing". Opportunist trying to cash in on press crucifixion of the banks.

    Comment


      #3
      Originally posted by aussielong View Post
      An interest rate swap is a simple product.
      He did not win, he got ****ed alongside with many other businesses who must have been coerced to get this tulip when they needed loans... easy to do when loan is desperately needed, people will sign anything!

      It would have made more economics sense for banks themselves to enter such contracts in order to be able to offer fixed interest rates on their loans... but of course they prefer to shift all risks to desperate suckers

      It's much worse than PPI scam because this tulip actually exposed businesses to unexpected losses.

      Comment


        #4
        It hurts to say this, but WAtWS.

        When news of this first broke, I agreed with aussielong - that this was no different to a fixed rate loan - and that the business owners were just whining that they placed the wrong bet.

        However when you dig into the details - that's when you realise the degree of mis-selling that was involved. The dodgy practices involved some or all of the following.

        * They were given the strong impression it was an interest rate cap, whereas it was really a swap/collar/structured collar.
        * The losses/gains were not asymmetrical - a 1% drop in rates cost a lot more than the gain of a 1% rise
        * The swap was not aligned to the actual loan - often being a higher base cost and longer term
        * There was effectively no get-out clause to the swap, even if you pay off the loan early. The only way out is to buy a new reverse swap - often at humungeous cost.

        Comment


          #5
          The real sad part is that banks were doing this tulip to their own customer base - fooking over your customers isn't exactly a good long term money earning strategy. Somebody got big bonus for short term profits though.

          Comment


            #6
            Originally posted by AtW View Post
            The real sad part is that banks were doing this tulip to their own customer base - fooking over your customers isn't exactly a good long term money earning strategy. Somebody got big bonus for short term profits though.
            Usually with a swap on its own, there is no exchange of principal ... It's not like a loan. They would of bought a floating rate loan to get the funds (cheaper than a fixed rate loan) and a swap to convert it to fixed rate. I'm skeptical still
            Last edited by aussielong; 30 July 2012, 21:49.

            Comment


              #7
              Originally posted by aussielong View Post
              I'm skeptical still
              Do you really think businesses that got this tulip alongside loans really needed or wanted such gambles?

              Comment


                #8
                Originally posted by AtW View Post
                Do you really think businesses that got this tulip alongside loans really needed or wanted such gambles?
                Yes, it's actually less risky because they locked in an interest rate at the start. With unhedged floating rate loans you can get burned, as we all know. These businesses failed to manage their cash.

                Comment


                  #9
                  Originally posted by aussielong View Post
                  With unhedged floating rate loans you can get burned, as we all know.
                  What kind of ****ing loan is that?!?!

                  Are you seriously saying that it's ok for somebody to take on mortgage or car loan and then have to pay FAR more money than reasonably expected on a loan being locked into much longer term contract than loan itself?!?!

                  It's BS - this tulip was sold along side loans just like PPI was sold, same tulip only B2B - same way people who got loan probably were coerced into agreeing to another "good sounding" contract or they would not get loan in the first place.

                  That's why it was high margin product - selling tulip to people who could not say no.

                  Comment


                    #10
                    Originally posted by AtW View Post
                    What kind of ****ing loan is that?!?!

                    Are you seriously saying that it's ok for somebody to take on mortgage or car loan and then have to pay FAR more money than reasonably expected on a loan being locked into much longer term contract than loan itself?!?!

                    It's BS - this tulip was sold along side loans just like PPI was sold, same tulip only B2B - same way people who got loan probably were coerced into agreeing to another "good sounding" contract or they would not get loan in the first place.

                    That's why it was high margin product - selling tulip to people who could not say no.
                    A mortgage is an example of a loan like that. Anyway , I bid you good night sir
                    Last edited by aussielong; 30 July 2012, 21:40.

                    Comment

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