Lloyds Banking Group announced on Thursday it will likely need to set aside a "material" amount of money to cover potential costs from a proposed regulatory scheme for motor finance.
The warning follows a consultation paper published by the UK's Financial Conduct Authority on an industry-wide redress plan for historical car loans.
"Based on our initial analysis and the characteristics of the proposed scheme, an additional provision is likely to be required which may be material," the company said in a statement.
This marks a shift from the bank's position in August, when, following a Supreme Court ruling on the matter, it stated that any change to its existing provision was "unlikely to be material."
The FCA's review concerns discretionary commission arrangements, where dealers could adjust interest rates for customers, potentially leading to higher costs for borrowers.
Lloyds cautioned that uncertainties remain regarding the interpretation and implementation of the proposals and that its analysis is ongoing.
The bank said it will update the market as and when appropriate.
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