Barclays has announced it will set aside an additional £235m for potential compensation claims from historic motor finance commissions.

The move takes the bank’s total provisions from an initial £90m announced previously to a new total of £325m.

Barclays follows Lloyds and Close Brothers who last week both raised their compensation pots for potential motor finance redress claims. Lloyds set aside an extra £800m to take its total provisions to £1.95bn, while Close Brothers raised its provisions by an additional £165m to £300m.

These moves have come after the Financial Conduct Authority (FCA) published a consultation two weeks ago on a proposed industry-wide redress scheme in relation to its investigation into motor finance commissions.

Historic motor finance discretionary commission arrangements (DCAs) have been under review by the FCA since January last year. This came after the regulator’s 2021 ban on DCAs had removed the incentive for brokers to increase the interest rate that a customer pays for their motor finance. However, a high number of complaints from customers to motor finance firms followed, claiming compensation for commission arrangements prior to this ban.

Barclays said the additional charge reflects the “increased likelihood” of a higher number of motor finance cases falling within the scope of the regulator’s scheme.

The bank, which ceased lending in the motor finance market in late 2019, said its cost estimates followed the FCA proposal that historical operations from April 2007 will fall within the scope of the regulator’s redress scheme.

Barclays confirmed the additional charge had been recognised in its Q3 results, which it also published today. The bank’s latest trading update revealed that it had delivered a return on tangible equity of 10.6% in Q3 and included the announcement of a £500m share buyback scheme.

Despite the extra charge, Barclays maintained it remains “on track” to deliver against its 2025 guidance and 2026 targets.

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