The case, which dates back to 2013, arose from negligent advice given by Grant Thornton concerning the use of ‘hedge accounting’ to reduce the volatility of the mark-to-market value of swaps in its accounts. The error forced the Society to close out its long-term swaps, which caused a £32m pound loss and meant that it had to source emergency funding.

Manchester Building Society hedged a portfolio of lifetime mortgages with long-term interest rate swaps. The value of the swaps fluctuated according to interest rates and their value had to be reported in the Society’s accounts. That would have produced an unacceptable level of volatility in the Society’s profit and loss and regulatory capital.

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