Sep 10, 2019
The UK’s slow-burn £50bn banking scandal
At more than £50bn, the financial impact now dwarfs all other British banking scandals in scale. Faced with rising competition and falling profit margins in the early 2000s British banks pushed staff to aggressively sell the product, regardless of whether customers were eligible to claim or even knew they were paying for the insurance. Royal Bank of Scotland said that extra provisions would wipe out about a third of its annual profit, while analysts warned that CYBG's dividend would be lower than expected after its latest provision wiped out most of its excess capital. The last-minute surge is unlikely to have had as big an impact, as a higher proportion of the provisions being set aside by banks is being spent on administration costs rather than handed out in compensation. Several banks have complained that much of the late surge in costs has been driven by professional claims management companies and law firms which have submitted large volumes of low-quality inquiries, the vast majority of which never lead to a formal complaint and compensation.
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