Britain’s Financial Conduct Authority (FCA) has warned motor finance firms must hold back cash as a probe into the market goes on.
“We expect you to undertake an assessment of whether your firm’s financial resources are adequate,” the watchdog wrote in a letter to firms on Friday.
This includes analysing whether the likes of dividend payments could cloud firm’s ability to pay liabilities relating to the probe in the future, the FCA said.
Analysts warned in January that auto lenders could be on the hook for up to £16 billion as a result of the probe, which is studying the historic use of so-called discretionary payments.
These saw brokers and dealers raise consumers’ interest rates, with deals dating back to April 2007 being assessed by regulators.
“Accounting standards generally require firms to make provision or recognise contingent liability in their financial statements,” the FCA explained.
“You should ensure that your financial statements are accurate and up to date. This includes considering issues relevant to your firm.”
Lloyds Banking Group PLC (LSE:LLOY) disclosed provisions totalling £675 million in February’s full-year update, where it also unveiled a £2 billion share buyback.
This was after Close Brothers Group PLC (LSE:CBG) scrapped its full-year dividend over concerns relating to the probe earlier in the month.
The FCA also warned on Friday that many firms had struggled to pass on relevant data relating to the probe, with records not having even been kept in some cases.