The cost of the payment protection mis-selling scandal has hit more than pounds 22bn after Lloyds Banking Group said yesterday it was setting aside an extra pounds 1.8bn to compensate customers. It takes the cost for Lloyds alone to just short of pounds 10bn after the bank, which is one-third owned by the taxpayer, revealed the extra costs in a surprise trading update. It was the seventh time the bank, owner of Halifax and Bank of Scotland , had increased its estimated bill for PPI - the biggest mis-selling scandal to hit the UK financial industry. Britain's banks and building societies have set aside a total pounds 22.2bn for PPI - enough to cover the cost of 2012 Olympics twice over. The amount is almost double the pounds 11.8bn bill for shoddy pension sales from the late 1980s to early 90s, and dwarfs the pounds 2.7bn for mortgage endowment mis-selling. George Culmer , Lloyds finance director, said predicting the cost of PPI was "fiendishly hard" but that the bank had got the numbers right this time. "It's a big number and it's obviously disappointing. There are always risks but we think it's appropriate." Lloyds shares were the biggest fallers in the FTSE 100 index, down nearly 4% to 80p. The PPI affair has dogged Britain's banks for years. They used high-pressure tactics to sell insurance designed to cover loan repayments if customers fell ill or became unemployed but in many cases the policies did not pay out or the buyer was not eligible in the first place. Britain's four biggest banks - Lloyds, Barclays , Royal Bank of Scotland and HSBC - together with Santander, are responsible for about pounds 19.6bn of the total, according to the consumer group Which? Lloyds has avoided many of the scandals from the financial crisis such as sub-prime mortgages and Libor rigging but its PPI bill is almost half the total. Which? has calculated that many of the banks are close to using up all the money they set aside and that Lloyds' hefty extra charge indicates the costs could continue to rise for other banks, too. Which? executive director Richard Lloyd said: "The cost of PPI mis-selling is a staggering pounds 22bn, and with banks continuing to increase their provisions it shows that they are still in denial about the size of this scandal." The financial ombudsman said last month it had 400,000 unresolved cases where customers had complained after being refused compensation by the banks. Lloyds said complaints fell towards the end of 2013 but that it no longer expects them to drop off as quickly as before. Its new forecast assumes a further 550,000 complaints. Last year the bank was fined pounds 4.3m for delaying PPI payments to 140,000 customers, and staff at one of its call centres were later revealed to be using tactics to deter potential claimants. The bank also announced an extra pounds 130m to compensate small- and medium-sized businesses that were mis-sold interest rate hedging products, taking the total cost to pounds 530m. Lloyds released the figures less than two weeks before its set-piece annual results because the extra costs were so big it was obliged to inform investors immediately. The mis-selling provisions may have scotched the bank's hopes of securing approval to resume paying a dividend. Lloyds said it would not ask the financial regulator to allow it to restart paying dividends until the second half of this year, scotching speculation that it might have restarted payouts with its 2013 annual results on 13 February. Many of Lloyds' 2.7 million shareholders held the shares for the dividend before it was forced to stop payments when it was bailed out in 2008. The bank said it had been in talks with the Prudential Regulation Authority about the dividend since the second half of last year. The bank also said it had started work on a sale of the 33% taxpayer stake to the public. Culmer said the prospectus for the share sale was underway and the bank would be ready to proceed once it had audited financial results in March. The timing of the sale was up to the government, he added. The bank expects to announce an underlying profit of pounds 6.2bn for 2013, which it said would be ahead of City analyst forecasts and more than double that of 2012. 33% Captions: The proportion of Lloyds owned by the taxpayer. It was the biggest faller in the FTSE 100 index on the PPI news
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