Extra year for PPI claims may cost banks £1 billion

Britain’s biggest banks face another bill for PPI mis-selling of up to £1 billion after the regulator set a 2019 deadline for claims, a year later than expected.

The later deadline, which will be accompanied by a huge advertising campaign, could prompt thousands of new claims from consumers, including some who have already received PPI compensation.

This is the first major decision announced by Andrew Bailey since he took over as chief executive of the Financial Conduct Authority last month.

“Putting a deadline on PPI complaints will bring the issue to an orderly conclusion in a way that protects both consumers and market integrity,” he said.

“We will ensure that our communications campaign will engage with all those who could be affected, particularly vulnerable consumers.”

Gary Greenwood, banks analyst at Shore Capital, said the banks could face extra costs of as much as £1 billion.

They have already paid out £24.2 billion in compensation to more than 10 million customers and the top six banks have made provisions totalling £34 billion. Lloyds, which tops the list with £16 billion set aside, said it was disappointed by the extended deadline.

“The proposed deadline is expected to be June 2019, which is later than anticipated and may therefore require banks to set aside further provisions,” said Greenwood. “We would not be surprised to see top-ups of a few hundred million pounds, and perhaps as high as £1 billion, for each of the large UK banks, with Lloyds being the worst affected.”

The FCA has been forced to delay imposing a deadline because of last year’s court ruling in favour of a customer Susan Plevin, which brought large commissions paid to banks by PPI product providers within the gambit of compensation. That potentially added billions more to claims.