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RBS sets aside £850m for PPI redress

Royal Bank of Scotland has become the latest bank to make a provision to cover the cost of payment protection insurance mis-selling in the wake of the British Bankers’ Association’s decision to drop its judicial review into PPI complaint measures.

RBS announced last night that it had set aside an extra £850m to cover the costs of PPI redress and associated administration costs.

The bank says: “ Although the costs of PPI redress and its administration are subject to a degree of uncertainty, RBS will record an additional provision of £850m in the second quarter of 2011.”

The bank has paid £100m in compensation to PPI customers to date, and has an existing provision of £100m.

It follows an eventful week in the case brought by the BBA in October to examine the legality of PPI complaint handling measures set out by the FSA in August.

The BBA argued the FSA was applying its rules retrospectively, and also challenged guidance published on the Financial Ombudsman Service’s website based on the FSA’s package of PPI redress measures.

The case was heard in January, and the High Court ruled in April in favour of the FSA and the FOS.

The BBA had until May 10 to lodge an appeal, but its appeal case was weakened by the shock announcement from Lloyds Banking Group on Thursday that it had made a £3.2bn provision to cover the cost of PPI redress.

Lloyds, which has the largest PPI market share, also announced it was withdrawing its support for the judicial review.

On Friday RBS said it could not quantify its PPI liability, but said the amount could be material.

Banks held conference talks over the weekend over whether or not to appeal. On Monday morning Barclays announced a £1bn provision and that it too was not backing any appeal.

This prompted the BBA  to announce it would not appeal the High Court’s decision, but said that it would pursue discussions over retrospective rules in other ways.

HSBC announced a £269m provision later yesterday morning.

RBS’ provision takes the total set aside by the banks to cover PPI compensation to £5.3bn, in excess of the £4.5bn cost estimated by the FSA last August. Analysts have suggested the industry cost could reach £8bn.

Santander, which was the only bank not to support the judicial review, does not expect to make additional PPI provisions. Its subsidiary Alliance & Leicester, which Santander acquired in 2008, was fined £7m by the FSA in 2008, the largest ever fine related to PPI mis-selling.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. how much longer do we all have to wait to be paid out nobody is answering this question.

  2. anthony brennan 11th May 2011 at 5:40 am

    It should be noted that the BBA V FSA Judicial review was not about PPI claims. The dispute was about a set of best practises that the FSA introduced in December 2010 and whether they could be applied retrospectively. The instructions from the FSA were that banks should justify why they had sold PPI and if they could not created the obligation to inform their customer of a “potential claim”.

    For the customer to recover this money they still need to establish a basis of claim ie on what legal grounds they believe they should receive their money back, they need to establish the type of claim ie termination or rescission of the PPI contract and quantify their claim.

    http://www.blog.bank-charges-recovery.co.uk/

  3. how to claim ppi from rbs 10th January 2012 at 12:44 pm

    Capital win 95% of all PPI Claims against Royal Bank Of Scotland (RBS). You too can Reclaim £3,500 in just 60 days for your mis-sold PPI Policy. Call 0800 652 7076 today. No Win No Fee PPI Claims.

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