Santander UK postponed its third-quarter financial results on Wednesday due to ongoing uncertainty over the Financial Conduct Authority's proposed motor finance compensation scheme. The Spanish-owned bank delayed publication while reviewing the implications of the regulator's redress proposals for potentially unfair car loans.
Chief Executive Mike Regnier called for urgent government intervention to prevent severe economic damage. "We believe that the level of concern in the industry and market is such that material changes to the proposed FCA redress scheme should be an active consideration for the UK Government," Regnier said. "Without such change, the unintended consequences for the car finance market, the supply of credit and the resulting negative impact on the automotive industry and its supply chain could significantly impact jobs, growth and the broader UK economy."
Financial Impact Spreads
Santander has already set aside £295 million to cover potential compensation claims. RBC analyst Benjamin Toms estimated the bank may need an additional provision of around £500 million based on peer bank levels. "Our best estimate, based on peers provisioning levels, is that the bank needed to take an incremental provision of around £500m," Toms said.
The concerns extend across the industry. Lloyds Banking Group, Barclays and Close Brothers have all increased their provisions for the scandal. Lloyds Chief Executive Charlie Nunn warned the scheme could wipe out decades of industry profits, saying: "When you look at the implication of what's been proposed by the FCA, it's going to potentially take 20 years of profitability off the car finance industry."
Regulator Defends Scheme
The FCA maintains its compensation scheme remains the best approach to resolve the issue. "We believe a compensation scheme is the best way to settle, for both lenders and consumers, liabilities that exist no matter what," an FCA spokesman said. "Alternatives would cost more and take longer. It's vital we draw a line under the issue so a trusted motor finance market can continue to serve millions of families every year."
The proposed scheme targets approximately 14 million potentially unfair car finance deals, with an estimated average payout of £700 per affected customer. Santander expects to provide a further update on the scheme's impact when it publishes its final results early next year.
Note: This article was created with Artificial Intelligence (AI).
