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Banks’ hopes to protect themselves from a scandal sold many billion pounds suffered a blow on Monday after judges prevented the United Kingdom government from supporting the industry in a court case.
The treasure had taken the unusual step of seeking permit to intervene in the future case of the Supreme Court, warning that a negative decision could damage the banking sector and increase economic growth.
The decision of the panel of five-member judges, including the President of the Supreme Court Lord Reed, to prevent the government from opening up is an obstacle for banks facing a compensation bill that exceeds tens of billions of pounds. The reasons were not given for refusal.
Shares in close brothers, who is one of the most exposed banks to car loans and said last week waiting to set aside £ 165m over the wrong sale possible, fell 7 percent on Monday.
The Supreme Court is due to April to hear an appeal brought by car loan providers opposing a decision last year by the Court of Appeal, which lean with consumers appealing to “secret” car loans.
The judgment that it was illegal for banks to pay a commission to a car dealer without the customer’s informed consent has sent shocking waves through the banking system.
Lloyds Charlie Nunn’s chief chief said in December that the United Kingdom faced a “investment problem” following a court ruling.
Lloyds, who owns the largest car finance lender in the UK Black Horse, has reserved a provision of £ 450m to cover possible compensation and legal costs. Shares in the bank fell 2.5 percent on Monday.
HSBC analysts have estimated that the total cost of compensation can amount to £ 44 billion, not far from the £ 50 billion paid by banks to secure the wrong payments.
While prevented the government from entering, the Supreme Court has allowed the Financial Behavior Authority to interfere with the matter.
The banking industry and the treasure hope that the regulator will submit to court many of the same points as the government had hoped.
FCA said “Look (ED) forward to help the court.”
The Treasury said: “We respect the court’s decision not to give our request to intervene,” adding that it will “monitor the case) closely.”
Treasury officials said that as the United Kingdom Ministry of Economy, it was appropriate for her to seek to share her perspective on the possible impact of the trial of the Court of Appeal with the Supreme Court, so it could be factorized in his discussions.
The Supreme Court has limited time and usually prefers to maintain the number of interventions at a minimum for efficiency, and will generally refuse permission when the arguments are already made by other parties, they added.