With extensive courage of LOBO’s in the last week ( ES, Independent & FT ) or so, particularly the exposure that UK Councils have up and down the country, lets not forget its another scandal the financial sector has inflicted on its customers.
Like Payment Protection Insurance (PPI) miss-selling by the B5, the LOBO’s (Lender Option Borrower Option’s) is really the miss-selling of derivatives to clients like Councils for whom trading in derivatives is illegal.
The miss-selling of LOBOs (Lender Option Borrower Option) to local authorities is not dissimilar to the Big 5 miss-selling of PPI to their customers as clearly derivatives use are buried in them which are “ultra vires” or illegal for local government to invest in on behalf of their residents. This is illustrated well in the case against Hammersmith & Fulham in 1989. So just like PPI miss-selling, LA’s caught up in it should be compensated fully by those who sold them these financial products without highlighting what it involved.
Unfortunately the LOBOs scandal can be added to the many other scandals we have had in the financial sector recently like the bail-out of RBS, Libor fixing, PPI compensation by big 5 for miss-selling to customers, to name but a few. It just adds to further calls for structural reform of the financial sector in the UK immediately.