PPI bill for UK banks could hit £5 billion

An analysis group has claimed that the UK’s major banks could be facing a bill of around £5 billion in relation to PPI claims from customers that believe that they were mis-sold this cover. US investment bank officials from Morgan Stanley claims that this could be the bill that UK banks are facing over the next five years, with the estimates cost of dealing with these claims continuing to increase.

Barclay’s Banks, Lloyds TSB, and HSBC are amongst those that may be footing some of this huge compensation bill. The prediction comes after American banking giant, the Bank of America, had to set aside $592 million to deal with forecast claims over Payment Protection Insurance. Officials believe that the cost to UK banks will be even higher.

Morgan Stanley has said that at the very least, as a base case scenario, the bill for UK banks is likely to be just over £2.6 billion. However, this is based on only a quarter of PPI policyholders making a claim, and also on fewer than half of these claims being upheld. Should the claims and approvals be higher than this the cost of dealing with claims could be considerably higher.

The average payout to each successful applicant is likely to be around £2000. PPI came under fire after investigations showed that over the years banks and financial institutions had been involved in mis-selling the cover, and this has resulted in many people finding themselves eligible to make a claim for compensation.

The Financial Services Authority has been trying to clamp down on PPI sales, and has brought in new proposals. However, these are being appealed by the British Bankers’ Association, which claims that the financial regulator is trying to apply new rules and standards to old sales.

 

Tags: protection, Primary dealers, Barclay's Banks, uk banks, PPI sales, mortgage, Business Finance, bank