UK regulatory agency announces final compensation plan for car loan mis-selling, Lloyds Banking Group plc Sponsored ADR (LYG.US) halts additional provisions.

Lloyds Banking Group plc Sponsored ADR (LYG.US) stated that it currently has no plans to increase provisions for compensation for mis-selling car loans customers following the final compensation scheme announced by UK regulators this week covering the entire industry. The bank said in a statement on Thursday that it has "assessed the impact and consequences of the final rules" and "currently believes that there is no need to adjust the amount of provisions for this issue." Lloyds Banking Group plc Sponsored ADR had already disclosed provisions close to 2 billion (approximately $2.6 billion), the highest among known peers. It was reported that the Financial Conduct Authority (FCA) in the UK had estimated last October that some of the largest car loan providers in the UK would pay around 8.2 billion to compensate affected customers. In order to initiate the refund program, lenders would also incur an additional cost of around 2.8 billion, bringing the total cost to around 11 billion. However, the FCA now expects that the total compensation paid by all lenders will be 7.5 billion, with the cost of operating the "simplified" compensation scheme being around 1.6 billion. This means that the scheme will overall result in the industry paying a total of 9.1 billion, lower than the previous estimate of 11 billion. Lloyds Banking Group plc Sponsored ADR's response indicates that it will comply with the FCA's call to proceed with the revised scheme rather than launch a legal challenge. For months, the industry has argued that the regulator's initial proposals were too stringent and failed to adequately consider a ruling by the UK's highest court last August the Supreme Court made a ruling favorable to lenders. The court ruled that banks would only have to pay compensation if "the most serious misconduct" was found. At the time, many bank analysts and investors viewed the ruling as a significant relief for loan providers.