Barclays' bombshell over scale of mis-selling scandal
Source: Agencies |
February 6, 2013, Wednesday
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Print Edition
Print Edition
BARCLAYS has set aside another 1 billion pounds (US$1.6 billion) to compensate customers for mis-selling products, dropping another British banking bombshell as the industry struggles with the scale of redress for past misdemeanors.
Barclays said it had made an extra provision of 600 million pounds to compensate customers for payment protection insurance. PPI mis-selling alone has now cost UK banks over 12 billion and could end up more than double that, industry sources estimate.
Barclays also set aside 400 million pounds more to cover claims for mis-selling interest rate hedging products, almost doubling its provision to 850 million and firing a warning shot that other banks face big bills too.
Yesterday's announcement marked Barclays' fourth provision for PPI, dating back to May 2011 when the industry lost a court case on the selling of products to customers who did not need, or could not use them. It has now set aside 2.6 billion pounds to settle claims for mis-selling of PPI - loan insurance to protect borrowers who missed repayments due to illness or redundancy, but which was often sold to people who were not eligible to claim.
Britain's financial regulator said last week that a study showed banks had mis-sold hedging products to businesses which did not need them, opening the door for massive payouts.
Yesterday, Barclays' new chief executive, Antony Jenkins, and its chairman, David Walker, were due to testify to a parliamentary inquiry into banking industry standards launched after Barclays was fined US$450 million last June in a third scandal over the rigging of Libor interest rates.
Jenkins, who used to run retail banking at Barclays, is likely to be grilled on why the bank - and the industry - has consistently underestimated the scale of redress for PPI claims.
Barclays said it had made an extra provision of 600 million pounds to compensate customers for payment protection insurance. PPI mis-selling alone has now cost UK banks over 12 billion and could end up more than double that, industry sources estimate.
Barclays also set aside 400 million pounds more to cover claims for mis-selling interest rate hedging products, almost doubling its provision to 850 million and firing a warning shot that other banks face big bills too.
Yesterday's announcement marked Barclays' fourth provision for PPI, dating back to May 2011 when the industry lost a court case on the selling of products to customers who did not need, or could not use them. It has now set aside 2.6 billion pounds to settle claims for mis-selling of PPI - loan insurance to protect borrowers who missed repayments due to illness or redundancy, but which was often sold to people who were not eligible to claim.
Britain's financial regulator said last week that a study showed banks had mis-sold hedging products to businesses which did not need them, opening the door for massive payouts.
Yesterday, Barclays' new chief executive, Antony Jenkins, and its chairman, David Walker, were due to testify to a parliamentary inquiry into banking industry standards launched after Barclays was fined US$450 million last June in a third scandal over the rigging of Libor interest rates.
Jenkins, who used to run retail banking at Barclays, is likely to be grilled on why the bank - and the industry - has consistently underestimated the scale of redress for PPI claims.
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