Barclays cuts jobs due to mis-sold PPI provision

Drop in profit leads to redundancies for bank staff

by Luke Whitmore, 3rd August 2011

Barclays has announced that they are to cut 3,000 jobs as a result of lost profits in the wake of the mis-sold PPI scandal.

The bank was forced to set aside a provision of £1bn to ensure that they were able to compensate customers to whom they had mis-sold PPI (Payment Protection Insurance), a controversial form of loan cover which was offered alongside a large number of the loans which were taken out in the past few years.

The scale of PPI mis-selling was found to be so vast that new regulations introduced by the FSA were intended to be applied retroactively, placing a legal obligation on the banks to offer redress to borrowers who had been misled over the utility of PPI cover, or who had simply had the cost of coverage added to their loan without being consulted over it. There was some controversy over this move, with the major banks initiating a High Court judicial review to assess the legality of the FSA's move, but the case went against them and the final decision was that they were eligible to pay out to customers.

Barclays was the only bank to introduce a no-questions-asked policy over mis-sold PPI claims lodged before the end of the judicial review, intended as a means of getting through their backlog of complaints. While it may have freed them up in terms of complying with the FSA's demands, the compensation has hit profits hard, and the job losses are a result of this.

The bank announced a 33% drop in their profits during the first half of this year. With 1,400 staff members already fired this year, the suggestion that a total of 3,000 job losses could take place this year has perturbed many in the banking sector.

Bob Diamond, chief executive of Barclays, blamed the situation on recent reforms in banking regulations.

If you have been affected by mis-sold PPI, we can help you claim PPI compensation.

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