Shares in Britain’s banks fell on Tuesday after the City watchdog extended the deadline for payment protection insurance (PPI) claims by more than a year.
Lloyds Banking Group PLC (LON:LLOY) dipped 2.2% to 52.07p, Barclays PLC (LON:BARC) fell 2.7% to 147.34p and Royal Bank of Scotland Group plc lost 2.8% to 183.77p amid fears that they may have to earmark more cash for claims.
The Financial Conduct Authority (FCA) confirmed that it would press ahead with a deadline for consumers to lodge claims for insurance mis-selling, as well as a consumer information campaign.
But the regulator said the proposed deadline would fall in June 2019 instead of early 2018 as originally planned because it needed extra time for consumer consultation.
Banks have faced a £30bn bill for the PPI scandal and experts said provisions were likely to rise, with the worst-affected bank - Lloyds – possibly having to pay up to £1bn extra.
In its 2015 full year results, Lloyds set aside extra provisions to cover claims until mid-2018, meaning an extra year’s worth of provisioning may now be needed.
Shore Capital banking analyst Gary Greenwood said: “Whether additional provisions are required and how material these may be is uncertain at this stage and we await further comment from the companies.
“However, we would not be surprised to see top-ups of a few hundred million pounds (and perhaps as high as £1bn) for each of the large UK banks, with Lloyds being the worst affected.”
The British Bankers Association (BBA) gave a muted response to the announcement, saying it would provide further clarity for consumers.
A BBA spokesman said: “An awareness campaign will also help to ensure everyone who deserves compensation gets it.
“The easiest way for anyone who suspects they are owed compensation, is to talk directly to their bank. We will continue to work constructively with the FCA as they consult on these proposals.”