Abhishek Sachdev of Vedanta Hedging was interviewed in two separate articles in The Times on 16th June 2014.
The first article explains how Banks are reducing the cash payable to SME victims by altering the price of the replacement products they are providing as redress. Mr Sachdev also talks about how the basis of the FCA scheme is wrong, the focus should be on the sales process, not merely a box-ticking exercise based upon the type of product sold. Complex products may be suitable if explained sufficiently, just as ‘simple’ swaps have often been mis-sold by not being explained properly.
Mr Sachdev said:
However, these calculations have been called into question. Abhishek Sachdev, managing director of Vedanta Hedging, a financial consultancy that advises MPs and small business owners on mis-sold hedges, said that some banks had over-valued substitute swaps. These erroneous valuations had passed through the independent reviewers and on to customers, who had been left out of pocket, he said.
Using historical pricing data from Reuters and Bloomberg, his firm has checked the valuations. On numerous occasions, the firm has found that a Reuters or Bloomberg price was far lower than the bank’s price, Mr Sachdev said. The lower the price of a substitute swap, the more compensation a customer receives.
Mr Sachdev said that banks normally reduced their valuations of substitute swaps when they were challenged with the historical pricing data.
“Small businesses aren’t really in a position to be able to price a derivative financial product like an interest rate swap,” he said. “Nor is it helpful when their bank gives them no information at all about how they reached their pricing decision.
“One central principle of the FCA’s scheme is that complex products are bad and simple ones are good. What’s more important is the sales process. There’s nothing wrong with a complex product if it’s suitable. Demonising complex products and leaving the door open to substitute in simple products doesn’t get to the heart of the issue.”
Abhishek Sachdev Times article 16th June 2014
The second article focuses on how the number of alternative products being provided are increasing by the Banks. Vedanta Hedging calculated an increase of 44% in the number of replacement products given just in the last month.
‘Abhishek Sachdev, managing director of Vedanta Hedging, a financial consultancy that advises MPs and small business owners on mis-sold hedges, said that alternative products were a “key problem” with the FCA’s compensation scheme. “There are going to be more fights about them,” he said.
Abhishek Sachdev Times article (2) 16th June 2014