After news broke earlier today that the FCA would extend the deadline for compensation claims on payment protection insurance (PPI), the potential impact on the UK’s banking sector has been revealed.
According to an analyst at Shore Capital, Gary Greenwood, speaking in a
Financial Times report, top-ups could reach a few hundred million pounds for each large bank – and potentially cost as much as £1 billion for Lloyd’s banking group. Meanwhile Ian Gordon, of Investec, told the publication that a delay was almost certain to increase the total cumulative cost – with Lloyd’s likely to feel the impact the most and Barclays second.
The reason Lloyd’s is set to feel the most heat from the decision is because it sold the most PPI in its position as the biggest lender in the UK. It stated that it would “monitor and review” its complaints trends for the insurance going forward. Its complaints have reportedly dropped from levels of 10,000 a week to 6,700 a week.
The estimates come after the FCA revealed plans to implement its deadline for PPI mis-selling claims in June 2019 – a full year later than its original plan. The decision comes after it chose to launch a consultation into the banks’ complaints handling and also launch a £42 million advertising campaign to raise awareness of the deadline. The cost of the advertising will largely be shouldered by the banks.
Lloyd’s stated that it was “disappointed” that the two-year deadline would not start until June next year.
However, some claims management firms believe the two-year deadline is not sufficient for customers and have threatened legal action over time limits in the past.
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