Bank of Ireland has more than doubled to £350m (€400m) the amount it had set aside to compensate customers for a motor finance mis-selling scandal in the UK.
This follows the UK's Financial Conduct Authority's consultation paper published on October 7 on the industry-wide commission arrangement between car dealers and lenders - which led to some customers being overcharged.
Bank of Ireland said its existing provision of £143m (€167m) at the end of June was based on probability weighted scenarios.
It said it captured the then best estimate of the redress and compensation that may have been payable to impacted customers, along with associated costs that may have been incurred by the bank in connection with any FCA redress scheme and/or legal proceedings.
But in a statement today, Bank of Ireland said that based on the FCA's proposals in their current form, it now estimates that the provision could increase from £143m to about £350m.
"The estimated increase is due to the increased likelihood of a higher number of eligible cases, the construct of the proposed redress methodology and the customer engagement approach," the lender said.
"The provision will be updated as part of the Group's FY25 financial reporting process, reflecting the final form of the redress scheme and any further relevant information. The final cost to the Group could change depending on the outcome of the consultation, actual customer opt-in rates and any further legal, regulatory or industry developments," it added.
Bank of Ireland also noted that the FCA's proposals are subject to consultation and therefore may change.
The motor finance mis-selling scandal is set to be one of the costliest consumer scandals for British finance.
Earlier this month Lloyds Banking Group said today it would take an additional charge of £800m to compensate customers for the scandal, bringing its total provision to £1.95 billion.
Bank of Ireland said it is committed to achieving a fair outcome for customers and ensuring that appropriate redress is provided where loss has occurred.
But it said that it does not believe that the FCA's proposed redress methodology reflects the actual loss to customers or achieves a proportionate outcome.
"In addition, the FCA’s proposed approach for assessing unfairness does not align with the legal clarity provided by the recent UK Supreme Court judgement. The group will engage with the FCA on this basis," the bank added.
Bank of Ireland shares rose in Dublin trade today.
