ONDON – Barclays is putting aside another 1.05 billion pounds ($1.65 billion) to cover the costs of scandals over mis-sold financial products, the troubled bank said Tuesday. The announcement suggests other U.K. banks may soon also have to pony up more cash to cover similar scandals.
Barclays said in a statement that it was increasing its provisions by 600 million pounds to cover mis-sold payment protection insurance and another 400 million pounds to cover mis-sold interest rate swaps to small businesses — a practice currently being investigated by Britain’s financial watchdog.
Analysts at Espirito Santo investment bank said in a note to investors this “clearly suggest that further provisions are likely by other U.K. banks.”
Payment protection insurance was widely sold to consumers as a way to keep up with their loans, mortgages, and credit card payments if they ever got sick or lost their jobs. But in many cases the insurance was inappropriate, unwanted, or unworkable.
A host of British banks — including Barclays — have been deluged with demands for compensation from angry customers, and Britain’s Financial Ombudsman Service said last week that the claims were coming in faster than ever.
Meanwhile, Barclays is struggling to contain the fallout from various other scandals over financial malfeasance — most notably an industry-shaking uproar over the manipulation of the LIBOR, a key interest rate which affects trillions of dollars’ worth of loans. Several global banks are accused of being investigated, with Barclays paying a $453 million fine to settle allegations.
Last week the bank’s CEO said he was giving up his 2012 bonus because of the many difficulties.
Shares in Barclays fell 0.1 per cent to 2.91 pounds in morning trading on the London Stock Exchange.