The bank had already set aside \u00a3143m (\u20ac165m) last year to pay compensation to affected customers.<\/p>\n
That bill is now set to rise after a new report this week by Britain\u2019s Financial Conduct Authority (FCA) has calculated that the total compensation bill for the banking industry will be \u00a38.2bn (\u20ac9.47bn), while the administration costs will add \u00a32.8bn, bringing the total cost to \u00a311bn.<\/p>\n
\u201cWe estimate this would result in consumers being compensated an average of around \u00a3700 (\u20ac808) per agreement,\u201d the regulatory body said.<\/p>\n
Bank of Ireland holds a 2pc share of the UK motor finance market.<\/p>\n
Shares in Bank of Ireland fell more than 1pc on Thursday in Dublin even as main rival AIB\u2019s stock rose. AIB is not exposed to the UK motor loans business.<\/p>\n
On Thursday afternoon, Bank of Ireland issued a note to investors saying it had noted the recent consultation paper from the FCA and suggesting it means more money needs to be set aside.<\/p>\n
\u201cPending finalisation of the consultation process which could result in a refinement of the proposed scheme, based on our preliminary analysis and the characteristics of the proposed scheme, an increase in the provision is likely to be required which may be material. This remains subject to ongoing analysis and review of the proposals,\u201d the bank said.<\/p>\n
Stockbroker Goodbody has estimated that the Irish bank will need to add \u20ac100m to its existing provision this year, related to the issue.<\/p>\n
While that is a lot of money the bank is very well capitalised and remains highly profitable.<\/p>\n
The UK motor finance mis-selling arose from commissions paid by banks and lenders to car dealers, which the regulator says were not properly explained to customers and which incentivised car sellers to sign borrowers up for higher interest rates on their car loans.<\/p>\n
The FCA believes the scheme will cover 14m finance agreements taken out between April 6, 2007 and November 1, 2024.<\/p>\n
Bank of Ireland said it will assess the full details of the FCA\u2019s proposed scheme and will engage in the consultation process over the coming weeks.<\/p>\n
Other lenders involved are also warning that the cost of compensation is set to be higher than previously expected.<\/p>\n
UK based Lloyds Banking Group warned it may need to set aside a “material” sum of extra money to cover the proposed compensation scheme. Lloyds already has a provision of \u00a31.2bn reserved for the mis-selling issue. But it said it was likely this will not be enough, having read through the proposals published by the Financial Conduct Authority (FCA) on Tuesday. Lloyds has significant exposure to the car finance industry through its Black Horse business.<\/p>\n
Gary Greenwood, an equity analyst for Shore Capital, said he estimates the motor finance industry had made only around \u00a32bn of combined total provisions, “suggesting significant further provisions may be required”. Another big car loan provider, Close Brothers Group, said on Thursday that it is also likely to make a “material increase” to its provision to compensate customers who were missold car loans. The amount of any extra provision is still under review, though the firm remains confident in its capital strength, according to a statement Thursday.<\/p>\n
Close Brothers said in February it had set aside \u00a3165m for the expected costs linked to motor finance misselling. London-listed shares in Close Brothers fell as much as 10.3pc on Thursday. Lloyds shares dropped as much as 4.1pc.<\/p>\n","protected":false},"excerpt":{"rendered":"The bank had already set aside \u00a3143m (\u20ac165m) last year to pay compensation to affected customers. That bill…\n","protected":false},"author":2,"featured_media":69609,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[14486,61,60,43],"class_list":["post-69608","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ireland","tag-donal-odonovan","tag-ie","tag-ireland","tag-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/69608","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=69608"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/69608\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/69609"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=69608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=69608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=69608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}