Mis-selling of interest rate swaps: Green and Rowley v RBS

In a ruling of interest to those institutions facing potential claims for mis-selling of interest rate swaps, the Court of Appeal has rejected an appeal by Paul Rowley and John Green in their action against RBS (the Bank), holding that the pair had not been advised to enter into the swap in question and, as such, the Bank owed them no common law duty of care. The case provides a measure of comfort to banks and other financial advisers, although its precedent value should not be overstated: judgments in such claims are, by their nature, highly fact specific.

Nevertheless, the case has some important lessons for banks and financial advisers, including a salutary warning as to the care needed when making representations to clients, for example, as to the portability of swaps.

We have also seen cases where banks are withholding consent to the transfer or assignment of swaps on a re-financing, as they may be entitled to do in accordance with the contractual documentation, which whilst securing continued revenue, should be judged in light of any representations at the outset that the swap was (unconditionally) portable, so as not to give borrowers ammunition enabling them to challenge refusals to assignment or transfer…

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