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Apr 06

How Barclays Turned a Domestic Appliance shopkeeper into a Derivatives Trader

Categories:

Banks, Bonuses, Financial Crime, General

The BBC’s Robert Peston reported on the 10 O’Clock News recently the plight of Paul Adcock, proprietor of Adcocks Domestic Appliances in Watton. It was really quite moving as Mr Adcock is the 4th generation of  his family to run the business and as he describes it he had “it has torn the soul out of the business”.
Mr Peston also interviewed Abhishek Sachdev of Vedanta Hedging who’ve we’ve spoken to. The whole of Robert Peston’s report can bee seen here. Mr Sachdev has explained the structure to us in some more detail.
As we understand it, the offending hedge was called an ‘Asymmetrical Collar’ which simply put actually increases Mr Adcock’s Interest Rate risk as rates drop.  The way it’s structured means that the bank has effectively made Mr Adcock sell a ‘Digital Interest Rate Option’ to the bank – this is what derivatives traders do and can be extremely dangerous.  We have heard from other sources that Barclays would have profited over £100,000 immediately on execution of the hedge. This is in addition to the profit Barclays make on the loan and regardless of what happens to interest rates. This paper profit would of course gone towards the bloated bonuses that are paid.
As we discover further details of how this odious structure works we will publish it here. If you have any further details you would like to share with us – please do get in touch. All of our sources are kept anonymous.
It does seem extraordinary that Barclays Capital, one of the premier league of Investment Banks, decided to trick Mr Adcock from Watton into being a derivatives trader. The motivation was not to hedge his risk, but clearly to fleece another unsuspecting client.

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  1. colin jones

    07/04/2012 at 10:18 (UTC 1) Link to this comment

    Reply

    Paul Adcock was tricked by his bank, my bank the natwest shoved me over to rbs and even though I refused to sign the documentation, after complaining they did a friendly btake over of my hotel, currently as theyb have now sold it at a loss of 250k, they have lost the tax payer considerable sums.
    My claim is strong so by the time we are done the bank will have lost circa £1million for what started as a 7k debt, these bankers do not have a clue how to run a business, but they know how to run with the bonus.

  2. Peter Wallis

    08/04/2012 at 08:57 (UTC 1) Link to this comment

    Reply

    Dear Sir / Madam

    I saw with interest the BBC New pice about Paul Adcock and I was sold the same product in 2007 to cover a proposed loan that was going to be for a new warehouse. I am now paying the consequences of that, but what is crimpling me, is that the bank did not give me the loan in the end, so am paying interest on 1.7m which equated to over £7,000 per month on a loan I do not have. If I want to pay to get out of the arrangemet, it will be £430,000 which is money I do not have.

  3. colin jones

    09/04/2012 at 06:21 (UTC 1) Link to this comment

    Reply

    For Peter Wallis – wow you have been tricked at the high end of the scale, have you put any other property against any other loans as security? If so you need to start complaining immediatly, first place is your MPs office, next a letter to the FSA and a complaint to the FOS, get on it immediatly.
    I saw a piece the other day that frightened me, the banks will have insured them selves some times 10 fold against you defaulting, so if you default they will sell your stuff for nothing aand claim £17 million insurance its in the benefit of the bank to destroy you and your firm, I know the RBS have done this to me. Also check out the telegraph financial on line, the comments and put your piece in there on the base rate swap stories, regards and good luck to you.

  4. sarvjit kooner

    09/04/2012 at 18:52 (UTC 1) Link to this comment

    Reply

    I was also sold one of these products in 2007 by Nastywest put simply a loan of £290,000 is costing me £44000 a year and a penalty of £70,000 to get out, it is without a shadow of doubt a mis sell. They kept on telling me this product is there to protect me against interest rate rises they never mentioned the other side of the coin and when I told my relationship manager I do not understand this product he said neither do I , you just need to remember its their to protect you. I took the case to FOS in 2010 after 18 months they voted in the banks favour, I think they just went by the signed contract and did not look at it closely enough, I have just recently taken it to my local mp who has written to Natwest it has not gone anywhere natwest have just written back to my mp saying their decision is unchanged I am by no means going to let this drop, it would be good for as many of us as possible to get together to take this further.

    1. liz walsh

      27/04/2012 at 20:55 (UTC 1) Link to this comment

      Reply

      Have a look at Bully Banks web page and follow on face book and twitter you need to join Bully Banks together we have power

  5. paul adcock

    09/04/2012 at 19:01 (UTC 1) Link to this comment

    Reply

    For Peter :

    Feel free to contact me thru the editor or via http://www.bully-banks.co.uk ( where you’ll also find useful info to back up Colin’s advice)
    Cheers
    Paul

  6. paul adcock

    09/04/2012 at 19:41 (UTC 1) Link to this comment

    Reply

    Dear Peter
    Following on from Colin’s advice check out http://www.bully-banks.co.uk, and if you would like to contact me, the Honestly Banking editor can put you in touch.

    Cheers

    Paul

  7. Editor

    28/04/2012 at 08:01 (UTC 1) Link to this comment

    Reply

    Bully Banks are doing good work. Good luck and keep it up!

    Best wishes

    The Editor

  1. BullyBanks Batter Bankers » Honestly Banking | Honestly Banking

    30/07/2012 at 20:53 (UTC 1) Link to this comment

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    [...] How Barclays Turned a Domestic Appliance shopkeeper into a Derivatives Trader [...]

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