On Thursday morning, Lloyds Banking Group announced that it would “likely… be required” to increase its motor finance provisions following further updates on the regulatory redress scheme.
The FTSE 100 banking giant, which owns Black Horse, the UK’s largest motor finance lender, currently tops the list with £1.2bn in provisions, as reported by City AM.
The Financial Conduct Authority stated on Tuesday that it anticipates its redress programme to cost up to £11bn and cover 14.2m agreements dating back to 2007.
Following the news, Lloyds’ share price rose by 3.5 per cent to 86.22, with many viewing the scheme – falling at the low end of cost expectations – as a positive outcome.
However, analysts have expressed concerns over the “forensic” level of governance expected to be imposed on lenders throughout the scheme as they attempt to demonstrate that their deals were not “unfair”.
Lloyds commented: “Uncertainties remain outstanding on the interpretation and implementation of the proposals but based on our initial analysis and the characteristics of the proposed scheme, an additional provision is likely to be required which may be material. “.
“This remains subject to ongoing analysis and review of the proposals.”
Lloyds boss: No evidence of harm in car finance
The regulator has placed lenders at the helm of the scheme, implying that overall costs could be relative to approach with administrative tasks. .
Christos Doumas, director at Forvis Mazars, commented: “In short, this is more than a redress exercise. It is a test of data discipline, accountability and governance across the motor finance sector, and one which provides many lessons for firms to prevent similar issues in the future.”
Earlier in the year, Lloyds Banking Group’s chief, Charlie Nunn, informed the Treasury Committee that there was “no evidence of harm” resulting from the company’s activities in the car financing market.
The banker instead suggested that the Court of Appeal’s ruling in October contradicted “at odds with 30 years of legislation”.
In August, the Supreme Court granted lenders a tepid victory by partially overturning the judgement, but upheld the case of one claimant on grounds of “fairness”, leaving the door open for the City watchdog’s redress scheme.
