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(Reuters) -British lender Close Brothers said on Tuesday it expects to take an additional charge of about 135 million pounds ($179.86 million) in relation to the motor finance mis-selling scandal, taking its total provision to about 300 million pounds.
The additional provision is expected to reduce its Common Equity Tier 1 (CET1) capital ratio, a key measure of a bank’s financial strength, by about 130 basis points on a pro-forma basis as at July 31, 2025.
Close Brothers had previously set aside 165 million pounds, but warned last week that the Financial Conduct Authority’s proposed redress scheme was likely to lead to a material increase in provisions.
Britain’s motor finance industry is on the hook for 8.2 billion pounds to 9.7 billion pounds to compensate consumers for unfair car loans.
Close Brothers said its increased provision reflected a greater likelihood that more historical cases would qualify for redress and a possibility of higher compensation levels than it initially planned.
The lender said it “does not believe the redress methodology proposed by the FCA appropriately reflects actual customer loss or achieves a proportionate outcome,” adding that it would continue to engage with the regulator.
The group’s pro-forma CET1 capital ratio would be about 13% as at July 31, 2025, after taking into account the additional charge and the benefit from the sale of Winterflood. The company had previously expected a CET1 ratio of 13.8%.
($1 = 0.7506 pounds)
(Reporting by Yadarisa Shabong in Bengaluru; Editing by Mrigank Dhaniwala)
