Bank PPI costs could double to £25bn

Bank of England BoE Bank 480

The final costs to banks of misselling payment protection insurance could hit £25bn, nearly double the £13bn banks have currently set aside, according to research from The Times.

The Times uses the FSA’s monthly PPI payout figures and historic selling data to make its calculations.

It also suggests that under a “worse-case scenario” the costs of PPI could be as high as £40bn, if banks are forced to pay back every fee they generated over more than a decade.

In November, the Bank of England set out in its Financial Stability Report an additional £4bn to £10bn in costs, on top of existing provisions, to cover fines and customer compensation.

The Times says banks were receiving 200,000 PPI refund requests a month last year. FSA figures show that the amount paid back in October 2012, the last month for which figures are available, was £534m, a rise on September, taking the total amount paid out to more than £7.5bn.