Close Brothers confirms it can absorb £320m car finance compensation
Close Brothers' capital teams avoid an immediate equity raise
Change
Close Brothers said it will fund about £320m of the Financial Conduct Authority's car finance compensation from existing capital resources, increasing provisions by roughly £26m.
Why it matters
More capital is now tied up in motor finance provisions, reducing near-term headroom for acquisitions or dividend increases. Banks without comparable buffers will face immediate pressure to raise capital or divest UK assets.
Implications
- — Capital and finance teams at UK retail banks with motor finance portfolios — must immediately recalculate provisions and capital headroom using the FCA redress terms — or risk being forced to raise new capital.
- — Investor relations and treasury teams at Close Brothers — must immediately incorporate the c.£26m incremental provision into cash and capital forecasts — or risk miscommunication to markets and elevated share-price volatility.
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