Banking sector gives up PPI fight

The banking industry has abandoned a legal fight over the mis-selling of payment protection insurance (PPI).

The British Bankers’ Association, which fought the case, said it would not appeal after losing a court challenge against new rules on mis-selling.

In a separate announcement, Barclays Bank said it had set aside £1bn to pay PPI compensation.

Last week, Lloyds Banking Group made a £3.2bn provision for compensation claims.

Royal Bank of Scotland and HSBC have yet to make a statement on PPI, but analysts believe they will now follow Barclays and Lloyds.

PPI policies are supposed to cover loan repayments if someone falls ill, has an accident or loses their job.

But the policies were mis-sold, many to self-employed or unemployed people who would not have been able to claim, and to consumers who did not realise they were taking out a policy.

Last month the High Court ruled that the banks were at fault.

In a statement the BBA said: “In the interest of providing certainty for their customers, the banks and the British Bankers’ Association have decided that they do not intend to appeal.”

Separately, Barclays chief executive Bob Diamond said the bank would now begin the process of compensating customers.

“We don’t always get things right: when we get them wrong, we apologise and put them right,” he said.