Barclays Bank announced that it has boosted its provisions for client redress associated with the mis-selling of interest rate hedging products (IRHPs) and payment protection insurance (PPI) by £1 billion (US$1.6 billion).
The bank announced Tuesday that it has almost doubled its provisions for paying redress to customers over improper sales of IRHPs to small and medium-sized businesses, following its pilot review of those sales, and the UK Financial Services Authority’s (FSA) report on the pilot reviews of several large banks.
For the fourth quarter, Barclays has increased its provision for IRHP redress by £400 million to £850 million in total, of which £36 million had been utilised as of the end of the year. “The main review and redress exercise will commence shortly and the appropriate provision level will be kept under ongoing review as it progresses,” it says.
At the same time, Barclays also bolstered its provisions for PPI redress by £600 million, bringing total provisions to £2.6 billion. It says that it determined higher provisions were appropriate based on a higher than anticipated response rate to redress efforts so far. Of the cumulative provision to £2.6 billion, £1.6 billion had been utilised as of Dec. 31, it notes.
“Based on claims experience to date and anticipated future volumes, the provision represents Barclays best estimate of expected future PPI redress payments and claims management costs,” it says. “Barclays will continue to monitor actual claims volumes and the assumptions underlying the calculation of the PPI provision.”