South Africa’s most valuable bank, FirstRand Limited, has warned that it may need to raise additional provisions for its UK operations as uncertainty deepens over the Financial Conduct Authority’s (FCA) proposed motor-finance redress scheme.
The Johannesburg-based lender, which operates in the UK through its motor-finance subsidiary, said the latest framework released by the FCA “appears to have moved beyond what can be considered proportionate or reasonable.”
The scheme could potentially cover 14.2 million finance agreements dating from 2007 to 2024 — about 44% of all car loan contracts during that period.
FirstRand has already set aside R6.26 billion (approximately $340 million) to cover possible claims, but the bank now warns that the amount might not be sufficient if the FCA’s final terms expand the scope of compensation.
The UK watchdog estimates the total industry cost could run into the billions of pounds, drawing comparisons to the notorious PPI mis-selling scandal.
“The potential liability associated with this proposal may far exceed expectations and create a precedent that undermines fairness in financial redress,” the bank said in a statement.
The FCA’s redress plan aims to compensate customers who may have been overcharged due to unfair commission arrangements between car dealers and lenders.
Several other UK lenders, including Lloyds Banking Group and Close Brothers, have also disclosed potential exposure and set aside additional provisions.
Analysts warn that a higher UK provision could weigh on FirstRand’s future profitability and capital ratios.
The bank’s UK business contributes around 20% of its balance sheet and 10% of earnings, underscoring its importance to group performance.
FirstRand’s share price has faced pressure following reports from Moneyweb, News24, and Daily Investor, which highlighted investor concerns over the growing uncertainty.
Market observers expect the bank to provide an updated assessment when it releases its next financial report.
Meanwhile, the FCA’s consultation process continues, and the final redress structure is expected to be confirmed in early 2026.
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