A group in Delaware, US, has taken aim at the UK bank for allegedly not having enough resources to pay for the redress that the Financial Conduct Authority might impose on it. Close Brothers has strongly disputed the claims. Its shares have fallen almost 9 per cent today.

Updates to provide results for six months to end-January; an earlier version referred to a three-month trading statement to end-October 2025. An updated version follows.

Close Brothers, a UK-listed bank that is among several financial groups facing redress costs linked to mis-selling of motor finance, said today that it strongly disputes a US-based group’s report claiming it has “systematically misrepresented” the scale of the hit.

Today, Close Brothers issued its results for the six months to 31 January, 2026. Yesterday, it pushed back against a suggestion that its Common Equity Tier 1 ratio – a measure of capital shock absorber – was inadequate for handling any redress that the Financial Conduct Authority might impose

The bank, along with others, is waiting for the FCA to state how it will treat the firms involved in the motor finance affair (see more here). Close Brothers has stated that it disagrees with the FCA’s proposed redress approach.

"We continue to engage with the FCA following the publication of their consultation in respect of motor finance commissions. We are committed to achieving a fair outcome for customers but do not believe the proposed redress methodology appropriately reflects actual customer loss or would deliver a proportionate and fair outcome in its current form,” Mike Morgan, CEO, said in a statement today.

The motor finance scandal centres on car finance deals that were sold in ways that were not fully transparent or fair, particularly through hidden commission schemes and discretionary commissions. The FCA's proposed scheme would cover regulated motor finance agreements taken out by consumers between 6 April 2007 and 1 November 2024 where commission was payable by the lender to the broker. Based on an 85 per cent of eligible consumers taking part, the industry will face an £11 billion total redress bill, with around £700 in the average compensation per case. It will cost firms £2.8 billion to implement the scheme, with £8.2 billion to be paid out. 

“Wipeout event”
On 16 March, Viceroy Research, which said it was “short Close Brothers Group” (ie, expecting a fall in its stock), released a note saying that if the group has to make further provisions to handle UK regulatory actions on the motor finance affair, Close Brothers will breach Common Equity Tier regulatory capital restrictions, and this could “create an equity wipeout event.”

Viceroy Research, which calls itself an “investigative financial research group,” is registered in Delaware. It says its reports are prepared for “educational purposes only.”

Shares in Close Brothers were down 8.9 per cent around 10:15 am London time today, at 325.62 pence per share. Since the beginning of 2026, shares have gone down 38 per cent.

“Our provisioning approach in relation to this matter is in accordance with UK-adopted international accounting standards and follows a robust governance process,” Close Brothers said yesterday in its statement responding to Viceroy. 

Results

"Our CET1 capital ratio remains strong at 14.3 per cent and we are confident that this leaves us well placed to absorb a range of potential outcomes from the FCA's proposed motor finance commission redress scheme," Mike Morgan, CEO, said in a statement today. "We remain focused on delivering our strategic priorities: simplify, optimise, and grow. With the simplification of our business largely complete, we are firmly in the optimisation stage, and have accelerated our cost savings plans. We now expect to deliver about £25 million of annualised savings in the current financial year and a total of c.£60 million of annualised savings by the end of 2027 rather than 2028. This positions us well to reach double-digit returns by the 2028 financial year, rising thereafter."

It logged an attributable loss of £64.4 million for the six-month period, narrowing 42 per cent from the loss a year earlier. On adjusted basis, it made an operating profit of £65.2 million, a fall of 19 per cent on a year earlier.

Viceroy comment
“Viceroy Research is short Close Brothers Group (LSE:CBG). We believe CBG has systematically misrepresented its exposure to the FCA’s forthcoming Motor Finance Consumer Redress Scheme. Our review of the FCA’s consultation paper, court transcripts, and independent claims suggests that CBG will have to double its existing provisions (at least),” it said. 

“Viceroy’s `Blue Sky’ outcome indicates that equity-holders will be substantially wiped out in a restructure,” the group said.

“Why haven't Close Brothers fully provisioned for the redress already? Because further provisions will breach CET1 regulatory capital restrictions and can create an equity wipeout event,” it continued. 

“Analysis of FCA consultation paper CP25/27 and Supreme Court case law indicates that Close Brothers’ redress exposure ranges from £572 million to £1.07 billion, well above its current £300 million provision. Close Brothers has exhausted all available measures to sustain its capital base, including the sale of key subsidiaries, risk weighted asset (RWA) reductions, and dividend cancellations.

At these levels, the group’s CET1 ratio will approach regulatory breach thresholds,” it said.

Further provisions could force Close Brothers to be below minimal capital requirements, triggering the suspension of additional tier 1 (AT1) coupons and possible write-down of the assets and a credit rating downgrade to “junk.”

In its “about” segment on its website, Viceroy says it is “dedicated to uncovering financial misconduct, promoting transparency, and holding public companies accountable, regularly publishing reports.”