National Australia Bank said today it was putting more money aside to deal with the mis-selling of loan insurance in Britain, joining other banks that have raised provisions to more than £22 billion in total. 

Compensation for customers who bought payment protection insurance (PPI) is the costliest mis-selling scandal in British banking history. 

PPI policies were supposed to protect borrowers against sickness or redundancy, but were often sold to those who would have been ineligible to claim. 

Lloyds, Barclays and Royal Bank of Scotland all increased provisions for PPI at recent half-year results, partly due to a jump in claims from policies taken out before 2005.

That is forcing banks to set aside extra cash to cover payouts and rising administration costs. 

NAB, which owns mid-sized lenders Clydesdale and Yorkshire in the UK, said it had raised its PPI provision by £75m to cover extra administration costs. 

The bank said "significant" additional costs were likely for customer payouts and a possible fine related to errors in its previous complaints handling process. 

National Australia Bank also set aside £170m to compensate small firms mis-sold risky products designed to insure them against rising interest rates. 

Major lenders have now put aside more than £4.4 billion for that issue, although they had only paid out £1.2 billion by the end of June.