BANKS bracing themselves for massive interest rate swaps settlements have helped push overall legal liabilities in the FTSE 100 up 12 per cent in the past year. Overall, blue-chip companies set aside £24.6bn in provisions during 2013, according to figures from Thomson Reuters. Banking companies, which make up around 14.4 per cent of the FTSE 100's market value, were responsible for 37 per cent of the index's provisions last year, up from 29 per cent in the previous year. This total does not include RBS's £3.1bn provision last week, intended to cover additional costs from litigation and compensation. The four biggest banks last year set aside around £3bn to settle cases with small businesses who were missold interest rate hedges. The Financial Conduct Authority has urged small companies to apply for compensation if they believe they were sold inappropriate rate swaps, after it emerged that just £158.6m of the money had been paid out to victims by the end of 2013. "Businesses hope that as the UK economy grows and memory of the recession fades that they will face lower levels of legal risk, but that hasn't happened yet," said Raichel Hopkinson , head of the practical law dispute resolution service at Thomson Reuters . "The list of major multinationals whose legal liabilities have reached such a scale that they have to sell assets or raise new capital is still growing." Meanwhile the oil and gas sector, which represents around 16 per cent of the FTSE 100's market cap, makes up 40 per cent of the index's legal provisions. BP's lingering litigation over the 2010 Gulf of Mexico spill makes up a big chunk of the industry's £9.9bn total. Hopkinson suggested that the advent of shale gas exploration in Britain could leave the sector at risk of more large provisions in future.
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