SCOTTISH lenders are set to make further hefty provisions for mis-selling payment protection insurance after the approach of the deadline for claims prompted a late surge in complaints.
Royal Bank of Scotland said it expected to provide up to a further £900 million in respect of PPI claims in its third quarter results.
Read more: RBS admits it can do better after coming bottom of official UK banking league table
Clydesdale Bank owner CYBG initially said it expected the cost of claims received since July 31 to be material.
The group said later that it expected to increase its provisions for legacy PPI costs by between £300m and £450m.
The updates highlight the impact of the regulator’s decision to impose a deadline of August 29 for the submission of claims in respect of PPI and the scale of the mis-selling scandal.
Edinburgh-based RBS said: “The volume of claims received during August was significantly higher than expected, with a further spike in the final days leading up to the deadline.”
The bank, which is 62 per cent owned by the UK Government, said it expected to provide from £600m to £900m in respect of the additional claims in its third quarter results.
RBS had provided a total of £5.3 billion in respect of PPI claims to the end of the first half on June 30.
It is in the process of choosing a new chief executive to succeed Ross McEwan who is leaving to run National Australia Bank.
CYBG said yesterday: “Following its Q3 Trading Update on 30 July 2019, the Group, in line with the industry experience, received unprecedented volumes of Information Requests and saw a significant spike in the final days prior to the complaint deadline. The Group also received an increase in complaints during August and a similar spike during the final days.”
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The group added: "During August we received more than eight months’ worth of Information Requests in one month with c.340k in aggregate over five weeks, of which c.120k of these were received in the final three days."
CYBG said it received an average of 5,000 complaints weekly week during the first four weeks of August and an additional 22,000 during the final three days.
The group said it would take several months to determine the quality of the information requests received and the related financial impact.
It added: “The Group is seeking to establish an initial cost estimate, which is expected to be material.”
CYBG had provided a total of £2.67bn for PPI claims and associated administration costs as at the end of the first half on 31 March.
The surge in claims may leave the Financial Conduct Authority feeling the decision it made in 2017 to impose the deadline for claims was right.
The FCA said then it wanted to prompt people into deciding whether to check if they had PPI and whether they wanted to make a complaint, amid calls from banks to bring an end to the long-running saga.
Read more: Lloyds takes massive hits for late PPI claims
The FCA introduced rules for complaining about PPI in 2011.
The scandal has taken a huge toll on lenders with a total of £36bn paid out to claimants by the end of June this year.
The firms concerned have also had to invest huge amounts of staff time into dealing with complaints and associated reputational issues.
While banks will be glad to draw a line under the PPI affair, economy watchers may be concerned about the implications for growth in the UK.
The PPI claims programme has been described as a form of quantitative easing for consumers.
Read more: Clydesdale in fresh row over business loan claims
The FCA says the average payout has been worth around £1,700.
On its website Bank of Scotland says: “The PPI deadline has prompted a high number of complaints.”
In its first half results the parent Lloyds Banking Group said: “Additional PPI charge of £550 million in the second quarter driven by significant increase in information request volumes in the second quarter, ahead of the August deadline.”
The group’s total bill for PPI payments has risen to more than £20bn.
Last month RBS posted increased first half profits, following an exceptional gain on the disposal of its stake in Saudi bank Alawwal.
However the bank said it had become “very unlikely” that it would meet key financial targets in 2020 because of the protracted economic and political upheaval.
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