Bank of Ireland, Secure Trust, and Close Brothers Boost Provisions as the FCA Redress Framework Moves Closer
Three more finance providers have now raised their provisions for potential payouts.
The FCA is now approaching the final stage of its work on the motor-finance redress framework, and banks are beginning to show – through their own balance sheets – that they expect a substantial compensation programme to follow. The regulator estimates that more than 14 million car-finance agreements may qualify, with total industry costs potentially reaching around £11 billion.
Three lenders in particular – Bank of Ireland Group, Secure Trust Bank, and Close Brothers – have now sharply increased their provisions. These changes are important because they offer an early indication of how seriously the sector is treating the FCA’s direction of travel.
Bank of Ireland Group: Provision More Than Doubles
Bank of Ireland originally set aside around £143 million to deal with redress. It has now lifted that figure to approximately £350 million, an increase of just over £200 million.
The company has also confirmed that this increase reduces its capital buffer (its CET1 ratio) by 35 basis points, a meaningful drop which shows that the institution is now reserving real capital to meet claims, not simply accounting for a hypothetical risk.
Secure Trust Bank: General Costs Become Real Liability
Secure Trust previously reserved only around £5 million, mainly to cover administration costs if a redress process were introduced. Following the FCA consultation, it has now revised this to around £21 million, with £16 million of that sum relating directly to expected payouts to customers.
As a smaller bank, the impact on its capital cushion is proportionally heavier, which explains why Secure Trust was one of the first lenders to publicly call the FCA’s approach “at the extreme end of expectations.”
Close Brothers: Provision Rises to £300 Million
Close Brothers had initially provisioned £165 million. It has now increased this to around £300 million, adding £135 million in its latest update. This places its expected exposure in the same range as Bank of Ireland, even though its portfolio composition is different.
The group has also signalled concern with how the FCA proposes to calculate loss, particularly in light of the recent Supreme Court judgment, another sign that methodology, not eligibility, may become the main area of dispute.
Why These Increases Matter
Provisions of this size tell us three things:
1. Lenders now expect compensation to be paid: These are no longer precautionary notes in financial statements. Banks are actively setting aside capital.
2. The debate is shifting from ‘if’ to ‘how much’: With eligibility largely accepted, the next contest is likely to focus on calculation methodology.
3. Consumers are now closer to seeing a structured compensation process: Lenders are already preparing to comply with whatever comes next.
The FCA is expected to publish its final framework in the coming weeks, after which claims handling will begin in phases. In practical terms, motorists who financed vehicles between 2007 and 2024 are the most likely to benefit from redress.
If you want to understand whether your own finance agreement is likely to qualify, you can check using our eligibility checker, which gives an initial assessment before the final rules are brought into force.
