LONDON, March 31, 2026, 13:11 BST
Barclays PLC is back in the spotlight, with the UK’s Financial Conduct Authority setting the definitive industry bill for car-finance compensation at roughly 9.1 billion pounds—less than the 11 billion pounds floated in last year’s proposal. That outcome means Barclays, which is among the lenders embroiled in the mess, must now see if its existing reserves will actually cover the fallout. Reuters
The timing here matters as Barclays has recently been touting bigger payouts—over 15 billion pounds to shareholders by 2028—while talking up bolder U.S. ambitions and improved returns. Setting aside more for soured car loans would cut across that upbeat narrative. Reuters
The FCA pointed to 12.1 million agreements from 2007 to 2024 that could see compensation, with average payouts landing near 830 pounds. According to the regulator, some borrowers missed out on better terms, and in certain instances paid extra, after lenders and dealers failed to fully disclose commissions or their commercial relationships. FCA
Payouts are expected to kick off this year, following a brief implementation phase. For loans issued since April 2014, firms face a June 30 deadline to prepare; for earlier cases, the window stretches until Aug. 31. After that cutoff, lenders have three months to notify complainants if they’re due compensation. FCA
Barclays now faces the question of whether its 325 million-pound provision—set aside by October for expected costs—will actually hold up. The bank boosted that reserve with another 235 million pounds, while at the same time announcing a 500 million-pound buyback. Strip out the provision, and Barclays was “quietly outperforming despite headline noise,” according to Hargreaves Lansdown analyst Matt Britzman. Reuters
Barclays isn’t the largest player here. Lloyds has already put aside 1.95 billion pounds, Santander UK has earmarked 461 million, and Close Brothers said Tuesday it’s still reviewing the final scheme. Back in October, when the plan was at the consultation stage, JP Morgan analysts figured extra provisions for UK banks would probably be “limited.” Reuters noted RBC’s view that Barclays and Close Brothers were likely covered by what they’d already set aside. Reuters
But motor finance isn’t the only credit worry in play. Just last week, Reuters said Barclays started tightening up on asset-based lending to smaller clients after it took hits from the collapses of Market Financial Solutions and Tricolor, putting the bank at risk of losses. Reuters
FCA chief executive Nikhil Rathi said the regulator had taken feedback on board and built a scheme he called “fair for consumers and proportionate for firms.” The compensation deal is split across two periods—April 2007 to March 2014, then April 2014 to November 2024—an attempt to head off lengthy disputes around older claims. FCA
That’s not the end of the story. Tom Dane, financial services partner at CMS, described the revisions as “tinkering around the edges”. Ashurst partner Nathan Willmott flagged that both lenders and borrowers could still challenge the outcome. The ultimate cost remains uncertain: the FCA trimmed its estimate of eligible consumers expected to make claims to 75% from the previous 85%. Reuters
Back in February, Barclays posted a 2025 pretax profit of 9.1 billion pounds and bumped up its profitability targets for the medium term. CEO C.S. Venkatakrishnan, speaking in October, pointed to the bank “robustly and consistently generating capital” for shareholders. That momentum gives Barclays some earnings buffer. Still, renewed charges tied to legacy car loans could complicate management’s push to highlight capital strength, cost controls, and improved shareholder returns. Reuters
