Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
Rankings & dataOctober 8 2015

End to PPI woes for banks?

Facing a possible 2018 for payment protection insurance complaints, the banks are looking to wrap-up a costly scandal.  
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon

To the relief of UK high street banks, the fallout from payment protection insurance (PPI) scandal may be drawing to a close as the Financial Conduct Authority considers a 2018 deadline for customers to file complaints.

So far, the debacle has cost the five largest participants £26.7bn since the first redress payments were made in 2011. The monthly payments by banks to customers peaked in 2012 and have remained at roughly between £300m and £400m since 2014 (see chart one).

Chart one

The same can be said of the number of complaints filed (see chart two). After the initial flood in the first half of 2012, there has been a downwards trend, with the first half of 2015 seeing the lowest levels since 2011.  However, with a firm deadline for complaints now in sight, it is likely that complaints and payouts will rise again.

Chart two

Lloyds has been the bank most affected by the scandal – it has set aside more than £13.4bn to tackle the claims so far (see chart three). It is followed by Barclays, which has saved £6bn in redress provisions, and RBS, which has set aside £3.8bn. HSBC was among the less affected banks, despite its strong high-street presence, with £2.6bn in provisions. Santander, the only foreign bank of the five, saved £846m to address the mis-selling.

Chart three

Unsurprisingly, the higher the uphold rate for a claim, the lower the average redress. HSBC had the lowest claim uphold rate of the five – only 73%. The average compensation paid by HSBC to successful claimants was nearly £2,600, the highest in the group. Conversely, at RBS, where displeased customers had the highest chance of success, the typical compensation was lowest at just below £1,700. 

Alongside what they have already spent, banks are braced for more payments. The British banking sector is estimated to be facing a further £15bn in PPI payments on top of what it has already paid out.

Lloyds reported in its half-year results that it expects 700,000 more complaints on top of the 3.2 million it has already received. HSBC is awaiting 300,000 more, in addition to the 1.3 million it has received so far and Barclays believes it will be receiving about 270 ,000 fresh complaints. Santander sees only 100,000 more coming its way. Both Lloyds and HSBC believe these complaints will cause the average compensation to increase slightly in the future.

Chart four

Was this article helpful?

Thank you for your feedback!